Some significant changes have been made in the tax deduction at source (TDS) on pension for the financial year 2024-25 and assessment year 2025-26. These changes can prove to be very beneficial for pensioners. Under the new tax system, the rates of TDS on pension have been reduced, so that pensioners will get more net pension.
In this article, we will give detailed information about the new TDS rates applicable to pension for FY 2024-25 and Ay 2025-26. Also, we will also tell how these changes will affect pensioners and what benefits they will get. Let’s know all the important things related to TDS on pension.
What is TDS on pension?
TDS on pension is a tax deduction at source is a process in which the pension -paying organization cuts the income tax implemented before paying pension to the pensioner. This deduction is done according to the rates prescribed by the Income Tax Department.
Main things of TDS on pension:
Description | Acquaintance |
Date of implementation | 1 April 2024 |
Assessment year | 2025-26 |
FY | 2024-25 |
Minimum limit | ₹ 50,000 per year |
Max rate | 30% |
Standard deduction | ₹ 75,000 |
Standard deduction on family pension | ₹ 25,000 |
Surcharge | Different on income basis |
Health and education cess | 4% |
FY 2024-25 new TDS rates on pension
Following are new rates of TDS on pension for FY 2024-25:
- No TDS on annual pension of up to ₹ 3 lakh
- 5% TDS on pension ranging from ₹ 3 lakh to ₹ 6 lakh
- 10% TDS on pension ranging from ₹ 6 lakh to ₹ 9 lakh
- 15% TDS on pension ranging from ₹ 9 lakh to ₹ 12 lakh
- 20% TDS on pension ranging from ₹ 12 lakh to ₹ 15 lakh
- 30% TDS on pension of more than ₹ 15 lakhs
These new rates will get a lot of relief to pensioners. Earlier there was a discount on pension of up to ₹ 2.5 lakh, which has now increased to ₹ 3 lakh. Apart from this, TDS rates have also been reduced in other slabs.
Increase in standard deduction on pension
FY 2024-25 has increased the standard deduction limit on pension to ₹ 75,000. Earlier this limit was ₹ 50,000. This increase will give pensioners a chance to save more tax.
Standard deduction means that pensioners can reduce the amount of ₹ 75,000 from their total pension with taxable income. This will reduce their taxable income and will also reduce the amount of TDS.
Increase in standard deduction on family pension
Standard deduction limit on family pension has also been increased. Now a standard deduction of ₹ 25,000 will be available on family pension. Earlier this limit was ₹ 15,000.
Family pension is the pension that is given to his family members after the death of a government employee. This pension will now get standard deduction of up to ₹ 25,000, which will provide more financial assistance to family members.
How is TDS calculated on pension?
TDS on pension is calculated in the following way:
- The total annual pension is first calculated.
- Then the amount of standard deduction is reduced from it.
- After this, TDS is calculated according to the TDS slab applied to the remaining amount.
- Finally, 4% health and education cess is levied on the amount of TDS.
For example, if someone’s annual pension is ₹ 8 lakhs, then TDS will be calculated as follows:
- Total Annual Pension: ₹ 8,00,000
- Standard deduction: ₹ 75,000
- Taxable Pension: ₹ 7,25,000
- Calculation of TDS:
- Up to ₹ 3 lakh: zero
- ₹ 3 lakh to ₹ 6 lakh: ₹ 15,000 (5% of ₹ 3,00,000)
- ₹ 6 lakh to ₹ 7,25,000: ₹ 12,500 (10% of ₹ 1,25,000)
- Total TDS: ₹ 27,500
- Health and Education Cess: ₹ 1,100 (4% of ₹ 27,500)
- Total deduction: ₹ 28,600
How to get exemption from TDS on pension?
In some cases pensioners may get exemption from TDS. For this, the following conditions have to be met:
- If the annual pension is less than ₹ 3 lakhs.
- If the pensioner is over 80 years of age and his annual pension is less than ₹ 5 lakh.
- If the pensioner submits the form 15h or 15G.
The following conditions have to be met for depositing Form 15H or 15G:
- Form 15H: For pensioners over 60 years of age
- Form 15G: For pensioners below 60 years of age
- The total annual income should be less than the taxable limit
Benefits of TDS on pension
TDS have some major advantages on pension:
- Ease of tax payment: Pensioners do not have to pay a large amount of tax at a time through TDS. Every month the tax is deducted in small installments.
- Time Payment on Time: TDS pays tax on time and pensioners do not have to pay penalty for delayed tax.
- Ease of filling tax returns: TDS makes it easier for pensioners to file tax returns. They only have to match the amount of TDS.
- Ban on tax evasion: TDS stops tax evasion and the government gets tax revenue on time.
Important points related to TDS on pension
Some important points related to TDS on pension that pensioners should take into account:
- TDS is cut every month, not at once.
- TDS Certificate (Form 16A) is released every quarter.
- Refund can be claimed if more TDS is cut.
- Pensioners are required to give their PAN number to the institution giving pension.
- The income of the previous financial year is considered the basis for calculating TDS.
New rules related to TDS on pension
Some new rules related to TDS have been implemented on pension from FY 2024-25:
- The new tax system has been made a default option.
- Pensioners will have to apply separately to choose the option of old tax system.
- There will be no tax on annual pension of up to ₹ 7 lakh.
- The cut limit on the contribution of the employer in NPS has been increased by 14%.
Disclaimer
This article is only for informative purposes. Although we have tried to provide accurate and updated information, tax laws and rules may change from time to time. So before taking any financial decision, please consult a qualified tax advisor or chartered accountant. Writers or publishers will not be responsible for any damage or damage caused by the use of this information.