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Retirement

Family pension after a death, and how India taxes it

A pension you receive after the death of the family member who earned it is taxed differently from your own pension.

You receive a family pension from India, the pension paid to you as the spouse, child or dependant of someone who has died, and you are an NRI trying to work out the tax. People assume it is taxed like an ordinary pension, but it is not: family pension is treated as a different kind of income, with a different and smaller deduction, and some family pensions are fully exempt. Getting the category right changes what you owe. Here is how a family pension is taxed for an NRI.
Last reviewed: 26 July 20266 min readReviewed by Preetesh Maloo, CA

The short answer

A family pension, the pension paid to you after the death of the family member who earned it, is taxed differently from your own pension: it is income from other sources, not salary. So it does not get the salary standard deduction; instead you get a smaller one, the lower of ₹15,000 or one-third of the pension, raised to ₹25,000 under the default new regime. Some family pensions are fully exempt, notably those paid to the family of an armed-forces member who died on operational duty, or a gallantry-award winner. For an NRI, an Indian family pension is Indian income taxable in India, and the deduction is available to you.

References on this page

  • Family pension is taxed as income from other sources, not salary (Section 57(iia))
  • The deduction is the lower of ₹15,000 or one-third of the pension; ₹25,000 under the default new regime
  • It does not get the salary standard deduction, which is the common confusion
  • Some family pensions are fully exempt: armed-forces operational death (Section 10(19)), gallantry awards (Section 10(18))

It is other income, not salary

The key point is the category. Your own pension, from your past employment, is taxed as salary. But a family pension, one paid to you because the person who earned it has died, is not your salary, you never worked for it, so it is taxed as income from other sources under Section 57(iia). That distinction decides the deduction you get.

Because it is not salary, it does not get the salary standard deduction of ₹50,000 or ₹75,000. Instead it gets its own, smaller deduction: the lower of ₹15,000 or one-third of the family pension, and under the default new tax regime that ₹15,000 figure is raised to ₹25,000. So a family pension is taxed on its amount after that modest deduction. Confusing it with the salary standard deduction, and claiming the larger figure, is the common mistake, and it does not hold up on assessment.

When it is fully exempt, and the NRI position

Some family pensions are not taxed at all. A family pension paid to the widow, children or nominated heirs of a member of the armed forces, including the para-military forces, whose death occurred in the course of operational duty is fully exempt under Section 10(19). And a family pension received by the family of a gallantry-award winner, such as a Param Vir Chakra or Vir Chakra recipient, is fully exempt under Section 10(18). So if the pension arises from one of these, there is no Indian tax on it at all, and it is worth checking whether yours qualifies.

For an ordinary family pension, an NRI is taxed in India, because it is Indian-source income, on the amount after the small deduction. An Indian payer may or may not deduct tax at source on it, so it needs to be reported and reconciled on a return. And as with other pensions, a tax treaty may affect where it is finally taxed, so the treaty position is worth checking. A practising CA classifies the family pension correctly as other income, claims the right deduction, applies any full exemption, and reconciles the Indian tax.

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What's involved

What the CA actually does

  1. 1

    We classify it correctly

    We treat the family pension as income from other sources, not salary, so the right deduction is applied and the return is not exposed to a disallowance.

  2. 2

    We claim the right deduction

    We take the lower of ₹15,000, or ₹25,000 on the new regime, and one-third of the pension, rather than the larger salary standard deduction that does not apply.

  3. 3

    We check for a full exemption

    We confirm whether the pension qualifies for full exemption, such as an armed-forces operational-death or gallantry-award family pension.

  4. 4

    We reconcile the Indian tax

    We report and reconcile the family pension on your return, including any tax deducted, and apply your treaty position.

What to have ready

Documents you'll typically need

  • The family pension details and who it is paid on behalf of
  • Whether it relates to armed-forces or gallantry service
  • Any tax deducted on the pension
  • Your PAN, TRC and residency details

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next — how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 31 countries.

Frequently asked questions

Common questions

Receiving an Indian family pension abroad?

Tell us about the pension. A practising CA will classify it right and claim any exemption on a free call, no obligation.

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