A family pension is a regular payment made to the spouse or children of a deceased employee. It is different from the pension received by an employee after retirement. Family pension is not taxed as salary income but as income from other sources. The tax treatment of family pensions depends on the amount received.
According to the Income Tax Act, 1961, a family pension received by a family member of a deceased employee is exempt from tax up to Rs. 15,000 or 1/3rd of the family pension received, whichever is less. The remaining amount is taxable as income from other sources and is subject to the normal tax rates applicable to the recipient.