Is family pension received by a widow taxable?

What does the law say?

The Income Tax Ordinance, 2001 treats family pension in three different ways, depending on how the employee died and who the employer was.

1. Death during service (public servants and Armed Forces). Clause (9) of Part I of the Second Schedule now reads, in the part still in force: “Any pension … (ii) granted under the relevant rules to the families and dependents of public servants or members of the Armed Forces of Pakistan who die during service.” Sub-clause (i), which exempted service pensions of the Armed Forces and government employees, was omitted by the Finance Act, 2025. Sub-clause (ii) was not.

2. Families of Shaheeds. Clause (16) exempts income of the families and dependents of Shaheeds of the Pakistan Armed Forces from the special family pension, dependents pension or children’s allowance granted under Joint Services Instruction No. 5/66. Clause (17) gives the same exemption to families of Shaheeds of the Civil Armed Forces to whom that instruction would have applied had they belonged to the Pakistan Armed Forces.

3. Every other family pension. Section 12(2)(f) includes “any pension or annuity” in salary. Section 12(2A)(i), inserted by the Finance Act, 2025, then says pension is charged as a final tax at the rates in the pension proviso to clause (2) of Division I of Part I of the First Schedule “where the amount received by an individual from a former employer for a tax year exceeds ten million rupees”, and that an individual who has reached seventy “shall not be charged to tax on pension income”. The pension table charges 0% on pension up to Rs. 10 million and 5% of the amount above Rs. 10 million.

How does it work in practice?

Situation	What the text says
Husband was a federal, provincial or other public servant, or in the Armed Forces, and died in service	Family pension exempt, clause (9)(ii)
Husband was a Shaheed of the Armed Forces or Civil Armed Forces	Special family pension and similar payments exempt, clauses (16) and (17)
Husband retired (government or private) and died afterwards	No exempting clause. Pension is salary under section 12(2)(f). Whether section 12(2A) and the pension table apply is unclear
Husband was a private-sector employee who died in service	No exempting clause. Clause (9)(ii) refers to “public servants”. Same uncertainty over section 12(2A)

Why the last two rows are unclear. Section 12(2A)(i) and the pension proviso both speak of pension received by an individual “from a former employer”. A widow receiving family pension was usually never employed by the payer. The Ordinance does not say whether family pension falls inside that wording, whether it is taxed at the ordinary salary rates instead, or whether section 12(5)(c), which treats amounts paid to an employee’s associate as received by the employee, has any role after the employee’s death. This page does not resolve that question.

Worked example (illustrative scenarios)

Three widows each receive a family pension of Rs. 1,200,000 in tax year 2027 (1 July 2026 to 30 June 2027).

1. Rukhsana, Peshawar. Her husband, a teacher in a provincial government school, died in service. Her pension is granted under the relevant rules to the family of a public servant who died during service. Clause (9)(ii) exempts the full Rs. 1,200,000.
2. Shazia, Rawalpindi. Her husband, a soldier, was declared Shaheed and she receives a special family pension under Joint Services Instruction No. 5/66. Clause (16) exempts that income.
3. Nasreen, Hyderabad. Her husband retired from a private cement company and died two years later. No clause exempts her pension. If the pension table applies to her, Rs. 1,200,000 is below Rs. 10 million and the rate is 0%, so tax is Rs. 0. If it does not apply, the pension would be salary taxed under the ordinary rates, and the Ordinance does not say which reading is right.

What if the widow is seventy or older?

Section 12(2A)(i) says the individual who has attained the age of seventy years “shall not be charged to tax on pension income”. That sentence sits in the same clause as the “former employer” wording, and the Ordinance does not say whether it reaches family pension. The age relief is clearest for a pensioner’s own pension.

What if she owns a house or a car?

Section 114(1)(b) requires a return from people who, among other things, own immovable property of 500 square yards or more, a flat in the areas described, or a motor vehicle above 1000 CC (sub-clauses (iii) to (vi)). Section 115(3)(a) lists “A widow” among persons not required to file “solely by reason of” those sub-clauses. The relief is limited to those triggers. A widow still falls under section 114 if, for example, her taxable income exceeds the amount not chargeable to tax (clause (ab)) or her income is subject to final taxation (clause (ae)).

Common mistakes

• Assuming the Finance Act, 2025 ended all pension exemptions. It omitted clause (8) and clause (9)(i). Clause (9)(ii) for death during service remains.
• Applying clause (9)(ii) to a pensioner who died after retiring. Its text is about those who “die during service”.
• Treating section 115(3) as a full exemption from filing. It only removes the property and vehicle triggers.

What to check in the official text

Read clauses (9), (16) and (17) of Part I of the Second Schedule, section 12(2)(f), 12(2A) and 12(5), sections 114(1) and 115(3), and the pension proviso to clause (2) of Division I of Part I of the First Schedule. Joint Services Instruction No. 5/66 and the pension rules that grant a family pension are outside this corpus.