Income Tax for Pensioners


Know how much you owe in taxes on your pension. Read in detail about the income tax for pensioners. Feel free to reach out to our tax experts.

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Income Tax for Pensioners - An Overview

A pension is a regular payment sent to a person by the employer they previously worked for after they retired from their position with the business, organisation, or government. It is a type of payment made to an employer to an employee in appreciation for years of service. Pensions are determined by any service contracts, as well as any prior agreements between the employer and the employee about tasks.

In your income tax return, pension is taxable just like salaries or payrolls. Pensions are consistently paid out once each month. One can also choose for a lump amount rather than a series of payments. Typically, the company and the taxpayer create an annuity fund together, and the fund is used to pay the taxpayer's pension.

Income Tax Benefits for the Pensioners

Senior and super senior citizens obtain better income tax advantages than anyone under the age of 60. Some of the advantages are listed below:

  • On the dividend paid for their health insurance programmes and policies, seniors are eligible for a deduction of up to ₹50,000
  • Additionally, they are excluded from filing advance tax returns for the year in which they have no commercial income
  • For those over 60, the money earned under a reverse mortgage plan is also tax-free
  • Senior citizens may be capable of a bigger deduction under Section 80DDB for the treatment of particular serious ailments
  • The interest they get from various bank deposits and securities is not subject to TDS (Tax Deducted at Source).

The government has decided to lower the tax responsibility on the nation's senior and super senior citizens. To assure that you live a financially independent life in your aged years, make sure you are conscious of the acceptable tax slabs, immunities, and the following tax advantages before you pay your income taxes. If you have any queries, talk to a tax expert now!

Income Tax for Pensioners Calculation

  • Pension income is often taxed under the ITR form's salary along with other salary-related income. A commuted pension is a pension that is either paid regularly or all at once. Pensions that are paid out on a regular basis, or ‘uncommuted pensions’ are subject to 100% taxation
  • Family members' commuted pensions that have been accepted as lump sum payments may qualify for an exemption from taxation under the category of ‘income from other sources’
  • Family members' uncommuted pensions are exempt from taxation if they earn at least ₹15,000, or one-third of the total pension amount
  • If an employee passes away suddenly, their employer will give a monthly household or family pension to a member of the family. Family pension is subject to taxation under the heading of income from other sources because there isn't a direct employer-employee relationship in this instance.

Income Tax Slabs for AY 2022-2023 for Senior Citizens

Income Tax Slabs for AY 2022-2023 for Senior Citizens
Income Tax for Pensioners

Income Tax Form for Pensioners

The Indian government has ordered HUFs and individuals to accept four types of income tax reports. Under which the people under general income through salary can file ITR-1. People who do not qualify to file taxes under the ITR-1 form's conditions should use the ITR-2 form. Those who receive income in the following ways are eligible to use the ITR-2 form:

  • Paychecks from salaries
  • Earnings from a pension
  • Gains from a residential property
  • earnings from unrelated sources
  • Gains from capital investments
  • Earnings and assets abroad
  • Agribusiness income of more than ₹5,000

What Is the Amount of Tax to Be Paid on One’s Pension?

  • If a person's taxable income outperforms the maximum threshold, they must document an ITR. Pension income is treated as salary income and must be reported under the heading ‘income from pay’ whereas investment income is taxed under the heading ‘income from extra sources’. Taxes are not applied to income obtained through interest on PPF funds.
  • The pensioner must calculate their total income before itr filing. They must add the pension amount to the entire taxable interest to determine their taxable income, from which they must deduct actual deductions like PPF investment interest, health insurance premiums, and other similar deductions. If they discover that the total income exceeds the exemption threshold.
  • Representatives of the federal or state governments, as well as retired members of the armed forces, are not required to pay any taxes on the commuted pensions they receive
  • Non-government employees are partially exempt from paying taxes on their held commuted pensions. If these employees received gratuities in addition to their pension costs, a commuted pension up to one-third of the pension value is tax-free
  • The remaining money, or 2/3 of the pension and gratuity amounts, must be paid in taxes under the heading 'Income from salary' employees who only have a commuted pension that makes up half of their payment are free from paying taxes on that portion of their pension.

Documents Required for the Pensioners

  • Aadhaar and PAN cards
  • All bank summary information
  • Request for family allowance gratuity (form 21)
  • Three copies of a passport-sized photo of the applicant that has been legally authenticated by the office head
  • The applicant's identity information, including height and individual marks, must be in duplicate and properly attested
  • Evaluation of the death gratuity and family pension (form 20)
  • Receipt from the board and directorate of properties asserting that there is no pressure or rights
  • Comparing the annexure to SGEGIS in duplicate (one copy obtained in advance)
  • Children's birth certificates with the date of birth
  • The penalty imposed by the responsible officials for forfeiting leave
  • Statement serving as service verification
  • Entry for the appropriate payment of the leave salary contribution and pension in the service book
  • Informational statement including the entire amount of non-qualifying service time
  • Form 1 a duly rightful countersigned by the family members

Why Vakilsearch

Our strong team comprises the largest professional network of lawyers, Chartered Accountants, and Company Secretaries in India. We handle all the documentation so that your interactions with the government run as smoothly as possible. In order for you to set reasonable expectations, we will also provide you with complete clarification on the procedure. Enjoy frictionless tax filing from now on. Just reach out to us!

Recent Updates

Senior Citizens are eligible for a larger reduction for paying the dividend for a medical insurance agreement of up to ₹50,000 under Section 80D of the Income Tax Act. The cap for non-senior citizens is ₹25,000.

Additionally, the Income Tax Acts Section 80DDB permits tax deductions for expenses paid by an individual for himself or a dependent's treatment of specified disorders as listed in the act. For senior citizens, the maximum deduction is ₹1 lakh (₹14,000 for non-senior citizen taxpayers).

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