Pensions are an important source of income for many people, particularly those who are retired or nearing retirement age. However, there is often confusion surrounding the tax implications of receiving a pension, particularly when it comes to family pensions.
One of the main areas of confusion is related to TDS (Tax Deducted at Source) on family pensions. The Income Tax Act does not have a specific provision for TDS on family pensions, which leads to confusion among taxpayers and tax practitioners. Some deductors deduct tax under Section 192 as salary, while others deduct tax under Section 194A.
This confusion can lead to difficulties in ITR (Income Tax Return) filing for the person receiving the pension, as well as notices from the department regarding the processing of ITR. Furthermore, it can also lead to unnecessary time-consuming litigations.
To address this issue, it is suggested that a new section be inserted under TDS provisions taxing family pensions exceeding Rs 2,40,000 per annum and that Section 192 be amended to specifically exclude the taxability of pensions under its provisions. This would provide clarity for both taxpayers and the department, and help to avoid unnecessary confusion and disputes.
In conclusion, a specific provision for TDS on family pensions is needed to provide clarity and avoid confusion and disputes. This will help the assessee as well as the department to get rid of unnecessary time-consuming litigations. Therefore, it is suggested to insert a new section under TDS provisions taxing family pension exceeding say Rs 2,40,000 per annum liable for TDS @ 10%. Simultaneously, section 192 may be amended to specifically exclude the taxability of pension under its provisions.