Pensioners Ineligible for Standard Deductions u/s 16(1) of Income Tax Act, 1961; Awaiting Legislative Clarification.

The circular addresses the issue of standard deduction eligibility for pensioners under Section 16(1) of the Income Tax Act, 1961. It clarifies that pensioners are not entitled to standard deductions as their income is not derived from employment. Despite several tribunal decisions favoring pensioners, the Ministry of Law supports the interpretation that standard deductions are not applicable. To minimize litigation costs, the Board advises against filing new reference applications unless the tax effect exceeds a specified limit. Additionally, appeals on this matter should remain pending until legislative clarification is provided.

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