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These plans areexcluded from tax on your federal return, but not onyour state income tax return. Once you retire and beginto receive pension benefits, you will pay federal tax onyour retirement payments, but you will not pay PA taxon those benefits.
What is the tax treatment for family pension received by the legal heirs of a deceased employee. It will be taxable under the head âincome from other sourceâ .under section 57(iia) a standard deduction shall be allowed to the legal heir @33.333% of such pension or Rs.15,000, whichever is less.hat is the tax treatment for family pension received by the legal heirs of a deceased employee. It will be taxable under the head âincome from other sourceâ .under section 57(iia) a standard deduction shall be allowed to the legal heir @33.333% of such pension or Rs. 15,000, whichever is less.