Com. K B Krishna Rao, General Secretary, Karnataka P&T Pensioners Association,Bengaluru, being a member of the SCOVA, received a communication from Department of Pension & Pensioners Welfare seeking views and suggestions on DIRECT TAXES to assist the Department in taking a pragmatic view for placing the matter before the Department of Revenue for its use during Budget Formulations relating to Direct taxes.In turn, Com. Krishna Rao sought our opinion on the matter. We have submitted the following suggestion:
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Suggestion: Pension being granted to Ex Govt Servants and Family Pension being granted to spouses of Ex Govt Servants should not be taxed.
Reasons:
1.Pension is not salary. Even if it is treated as Salary, it is deferred payment, as observed by the Apex Court. When delayed payment is made as arrears of pay or pension, the whole amount is not accounted for the respective assessment year, based on Form 10E filed by the assessee.
2.Pension of Ex MPs and their spouses is not being taxed on the plea that “it is not salary but income from other sources”. The ‘source’ is nothing but Government Funds. They are paid pension by Government of India from government funds, not by the people who elected them. Family pension is paid to the spouses of deceased MPs and former MPs by Government of India not by the voters. At the same time, sitting MPs, Ex MPs and their spouses are entitled tobenefits at par with central government employees and pensioners in the matter of medical facilities under CGHS etc. While the pension to Ex MPs and family pension to spouses of Ex MPs is not being taxed there is no justification for taxing the pension being granted to Ex Government servants and spouses of Ex Employees who receive pension from the same source of Government funds.
2.Pension is not being taxed in countries like Brazil, Russian federation and Sri Lanka as well as number of states in USA.