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Periodic Pension is Taxable for all Employees

Karan Sharma Karan Sharma 05 December 2019

If you receive a pension from the defence sector along with salary from existing second service, then the periodic pension received will be subject to income tax. Read on to know more on this subject.

Periodic Pension

Since period pension is taxable for all employees, pension received from the defence sector will be taxable and treated as salary. When a taxpayer receives salary from more than one employer or from two different companies, he/she is required to file tax returns using ITR-2. Also, the individual should not have income from any business profession.

The ITR-2 form falls under Schedule S. An individual will be required to submit the following details.

  1. Details of both the employers such as name, address
  2. Tax deduction and collection account number (TAN)
  3. Component wise break-up of salary

As per ITR-2 form, an individual will be categorised under ‘Pensioners’ with respect to pension received from the defence sector. The disclosure requirements and tax return forms for FY20 will be published after the end of FY 20. ‘Individuals Making Payments to an NRI are required to Deduct Tax’

It mandatory to deduct TDS on the rent paid to NRIs, irrespective of the amount of rent paid.

As per Section 195 of the Income Tax Act, 1961, any person making payment to an NRI is obligated to deduct tax at the rates in force at the time of credit of such income to the individual. While there is no specific threshold, the deduction is required to be made irrespective of the rental amount. Even if the rent is paid to two individuals separately, tax deduction is required to be done on both payments, irrespective of the amount.

In case, the rent is paid by the tenant directly, it does not constitute taxable income in the hands of the payee or the landlord. Either the tenant or the landlord is required to make an application in a prescribed form and manner to Indian Tax Authorities. The tax authority will issue a nil or lower tax deduction certificate as per Section 195(2), 195(3) and 197 of the Income Tax Act, 1961. When the nil or lower tax deduction certificate is issued, TDS is required to be deducted at the rate prescribed in the certificate for the period specified in the certificate.

Karan Sharma
Written by Karan Sharma
Content Specialist and Strategist, foolishly creative and always ready for a game of 'Call of Duty'.