Pension received by dependent family member of the retired individual is known as family pension and it is considered as, ‘Income from Other Sources’. Dependent family members include: spouse, children below the age of 25 years, unmarried daughter. Family pension is paid to a nominee or heir of the retired individual when he/she has deceased.
The taxability of pension is determined based on the type of pension. Pension can be of two types—‘Commuted’ and ‘Uncommuted’.
If this pension is Commuted or is a lump sum payment, it is not taxable. Uncommuted pension received by a family member is exempt to a certain extent