What is a Family Pension? A Complete Guide

In India, a Family Pension is a crucial government-provided financial support for dependants of deceased employees. This guide details Family Pension calculation after death of pensioner, the family pension calculation formula for central government employees, and eligibility criteria. Read on to learn more about how pension is calculated and deductions and taxability.

Contents

• What is Family Pension?
• Types of Family Pension
• How Does a Family Pension Work? 
• Who is Eligible for a Family Pension?
  • 1. Eligibility for Spouse
  • 2. Eligibility for Children
  • 3. Special Conditions for Surviving Children
  • 4. Adopted Child
• Family Pension Rules After the Pensioner's Death
• Tax Implications of Family Pension
• Difference Between Pension And Family Pension
• Documents Required for Family Pension
• How the Family Pension is Calculated
• How Term Insurance Complements Your Family
• Wrapping up 
• Frequently Asked Questions (FAQs)

What is Family Pension?

A Family Pension is a financial provision offered by the Indian government to ensure a regular source of income for the family of deceased employees. This particular family pension is reserved for those employees who began service in a pension-eligible government post on or before January 1, 1964. Nevertheless, those joining on or before December 31, 2003, are still covered under the regular pension scheme.

This support replaces the salary or pension the employee would have received during his/her lifetime. Depending on the eligibility criteria and specific family pension deduction rules, the pension amount is paid to the spouse, children, or dependent parents of the deceased employee.

Types of Family Pension

Family pension in India can be classified into different types, depending on the circumstances and the relationship between the deceased employee and the claimant. The most common types of family pension are:

Also read: Different Types of Pensions in India

How Does a Family Pension Work? 

As per the pension rules, a Family Pension is based on the last drawn basic pay of the deceased government employee or pensioner. If the employee dies during service, the pension is set at 50% of the previous pay for 10 years. After this period, it is reduced to 30% of the last drawn pay.

After the death of a pensioner, it continues at 50% for seven years, then 30%. Pension to a wife after the death of a husband or children (up to age 25) follows the “Family Pension rules after death of pensioner in India” and specific eligibility criteria. 

Who is Eligible for a Family Pension?

Understanding “who are eligible for Family Pension” and “who are not eligible for Family Pension” is vital. Awareness of the Family Pension rules ensures families can secure their rightful benefits during difficult times. Specific eligibility criteria must be met to receive a Family Pension in India. These include:

1. Eligibility for Spouse

• The widow receives the pension until she remarries or passes away.

• If the widow has no children and remarries, she can still receive the pension if her total income (from salary, business, property, etc.) is below the minimum family pension amount.

(The pension to wife after death of husband application process includes various steps, such as filling out forms and submitting the necessary documentation. )

2. Eligibility for Children

• The eldest child receives the family pension until they become ineligible for survivor benefits.

• In the case of twins, the pension will be split equally between them.

• In the case of a son, he is eligible for the pension until:

• They turn 25

• They start earning

• They get married (Whichever comes first)

3. Special Conditions for Surviving Children

• If the family pension is under the Family Pension Scheme 1964, the surviving children will receive the pension benefits.

4. Adopted Child

• An adopted child is not considered a family member of the deceased pensioner and is not eligible for the family pension.

Also read: Retirement Plans in Life Insurance 

Family Pension Rules After the Pensioner's Death

As per the guidelines issued by the Department of Pension and Pensioner’s Welfare (DoPPW), eligible family members can claim the family pension through a simple process at the pension-paying bank. Here's a guide to follow: 

Step 1: Visit the Pension-Paying Bank

• The eligible family member (usually the spouse) must go to the bank where the pension was being credited.

Step 2: Submit Required Documents

• Carry the death certificate of the pensioner.

• Submit the Pension Payment Order (PPO) — specifically, the half-page copy that contains key pension details.

Step 3: Account Check

• If there is an existing joint account with the deceased pensioner, simply submit:

  • The death certificate, and

  • A written request to activate the family pension.

• If there is no joint account, the beneficiary must:

  • Open a new bank account in their name.

Step 4: Provide KYC Documents

• The beneficiary must submit a PAN Card, an Aadhaar Card and a joint passport-size photograph. 

Step 5: Activation by Bank

• The bank updates its records with the date of death of the pensioner.

• Half of the PPO will be returned to the claimant for their records.

Step 6: Notification to CPPC

• The bank informs the Central Pension Processing Centre (CPPC).

• Once verified, the family pension starts getting credited to the beneficiary’s bank account.

Also read: EPFO 

Tax Implications of Family Pension

1. Family Pension is Taxable: Family pension received by legal heirs after the death of the pensioner is considered "Income from Other Sources" under the Income Tax Act.

2. Standard Deduction Available: A deduction of one-third of the pension amount or ₹15,000, whichever is lower, is allowed from the total family pension received under Section 57(iia) of the Income Tax Act. For example, 

If the annual family pension is ₹60,000

• One-third of ₹60,000 = ₹20,000

• Deduction allowed = ₹15,000 (since it's lower)

If the annual family pension is ₹30,000

• One-third of ₹30,000 = ₹10,000

• Deduction allowed = ₹10,000

3. ITR Filing: The spouse or dependent receiving the family pension must report it under ‘Income from Other Sources’ while filing their income tax returns.

Difference Between Pension And Family Pension

Many people are often confused between regular pension and family pension. Here's a clear explanation to help you understand the difference.

Documents Required for Family Pension

Specific documents are required to apply for a Family Pension in India, including the application for a Family Pension after the death of a pensioner and proof of service and dependency. Knowing who is eligible for a Family Pension and the “Family Pension rules after death of pensioner” is essential to ensure all necessary documentation is submitted for timely benefits processing.

Some of the documents required for a Family Pension are as follows:

• Deceased employee's death certificate.

• Proof of relationship with the deceased employee (birth certificate, marriage certificate, etc.).

• Last pay certificate of the deceased employee.

• Claimant's bank account details.

• Any other specific documents asked by the department.

How the Family Pension is Calculated

The calculation of Family Pension depends on factors such as the deceased employee’s last drawn pay, length of service, and the type of pension. The pension formula is structured as follows:

• Ordinary Family Pension: 30% of the last drawn pay of the deceased employee is granted as family pension. If the employee had completed 7 years of qualifying service, it can be enhanced to 50% of the last drawn pay. 

• Enhanced Family Pension: 50% of the last drawn pay is granted in cases like accidents or acts of violence.

• Dependent Parents' Pension: 75% of the last drawn pay is provided if both parents are alive, while 60% applies if only one parent is alive.

A basic pension calculator can simplify the Family Pension calculation process. Understanding the retirement pension calculation formula can be helpful for those wanting deeper insights into pension benefits for their families.

How Term Insurance Complements Your Family

Term insurance is a crucial part of any comprehensive financial plan, offering your loved ones financial security in the event of the unexpected. It provides long-term stability for your family by providing a lump-sum payout, which can cover major costs like home loans, children's schooling, or medical emergencies. For instance, the best term insurance plan for 1 crore can offer the right level of coverage for such essential costs.

You can make a smart decision by using a term insurance calculator to calculate the premium for the required coverage. Including term insurance in your financial plan gives you peace of mind and guarantees your family's financial security. Explore your options now and buy life insurance. 

Wrapping up 

Family Pensions in India are essential for the financial well-being of dependants of deceased government employees. It supports maintaining their living standard through a Family Pension after death of pensioner. This article discussed Family Pension, eligibility, types, Family Pension calculation formula, and the application for Family Pension after the death of a pensioner.

You can make informed decisions by understanding the “Family Pension rules after death of pensioner” and how the pension is calculated. Options like Term Insurance can supplement the pension to the wife after the husband's death and secure your family's financial future.

Frequently Asked Questions (FAQs)

Here are some frequently asked questions regarding family pensions.

1. Is Family Pension taxable in India?

Yes, your Family Pension is taxable under "Income from Other Sources". The taxable amount is determined after deducting either 1/3rd of the pension received or ₹15,000, whichever is less. The remaining amount is subject to taxation per the applicable income tax slab.

2. What is the difference between a pension and a family pension?

A pension is given to the retired employee, whereas a family pension is given to the dependants of a deceased employee or pensioner.

3. Who is eligible for the family pension?

The family members, usually the spouse, children, or dependent parents, of the deceased employee or pensioner.

4. Can the amount of my Family Pension be increased or revised?

Yes, your Family Pension amount can be increased or adjusted later. The government periodically reviews and adjusts pension amounts based on inflation per the pension calculation formula and Family Pension regulations.

5. How is the family pension calculated?

Families who are entitled to a Family Pension on the death of a deceased employee can calculate using the Indian government's pension calculator. 

6. Can children receive a Family Pension without a surviving spouse?

Yes, if there is no surviving spouse, your dependent children can receive the Family Pension after death of pensioner. The children become the primary beneficiaries in such situations per Family Pension rules.

7. Can I transfer my Family Pension to a different bank account?

Yes, you can transfer your Family Pension to a different bank account. To do this, you must submit a written request to the relevant government department with details of the new account.

8. What is the minimum pay for a family pension?

The minimum pay for a family pension varies by scheme but generally ensures a basic support amount for dependants.

9. What is the rate of family pension schemes?

Depending on the pension scheme, the percentage usually varies between 30% to 50% of the last drawn salary of the employee.

10. How Long Does Family Pension Last?

It usually continues until the dependent reaches a certain age or condition (e.g., children reaching adulthood or marriage).

11. Can a widow remarry and continue receiving a Family Pension?

If a widow marries again, she generally forfeits her claim to the family pension. But there are exceptions, like in the case of childless widows with no other means of income.

12. Can Family Pension be transferred to another family member?

Yes, in case the original beneficiary (say, spouse) is no longer eligible, the pension can be transferred to other dependants like children.

13. How to calculate family pension in India?

To understand how to calculate family pension, it's important to refer to the official calculation of family pension guidelines issued by the government. Typically, the family pension calculation formula is 30% of the last drawn basic pay, subject to a minimum and maximum limit. Using a reliable family pension calculator can help beneficiaries estimate the exact pension amount they are entitled to receive.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.

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