How To File Income Tax Return for Pensioners in India?

Income Tax on Pension

Pensions are categorized as "Income from Salaries" under the Income Tax Act. Pensioners need to file their Income Tax Return (ITR) if their total annual income exceeds the exemption limit. The pension amount can be commuted (a lump sum) or uncommuted (received monthly or yearly). Here’s a detailed guide on how to file the ITR for pensioners, focusing on making the process clear and straightforward.

Table of Contents

1. Types of ITR Forms for Pensioners
2. Filing ITR for Pension Income: Step-by-Step Process
3. Ways to Reduce Tax Liability on Pension
4. Things to Know While Filing Pensioners’ ITR
5. FAQs

Types of ITR Forms for Pensioners

• ITR 1 (Sahaj): Most pensioners use this form. It applies to individuals whose income is mainly from a pension or salary. It’s a simple form that can be used by pensioners with a single house property and income from other taxable sources

• ITR 2: This form is for individuals receiving pension income from funds where contributions were made by their employer. It requires details like the name, address, and Tax Deduction and Collection Account Number (TAN) of the employer. In this form, pensioners need to select "Pensioners" as their employment category.

Filing ITR for Pension Income: Step-by-Step Process

• Visit the Income Tax e-filing website: Log in using your credentials.

• Navigate to 'e-File' > 'Income Tax Returns': Select the relevant assessment year and the online mode of filing.

• Choose ITR Form: For pensioners, select 'ITR 1 (Sahaj)' from the options provided.

• Prefill and Verify Details: Personal information will be pre-filled from your e-filing profile. Verify the gross total income, especially for pension and other sources.

• Add Deductions: Enter details for various deductions under Sections 80C, 80D, 80TTB, etc. For example:

  • Section 80C: Investments in National Pension Scheme (NPS) and Public Provident Fund (PPF) schemes.

  • Section 80D: Medical insurance premiums.

  • Section 80TTB: Interest income from savings up to Rs50,000 for senior citizens.

• Verify Total Tax Liability: Review the calculated tax liability and make any necessary payments.

• Preview and Submit: Validate all the details, choose the verification mode (e-Verify Now or Later), and submit the return.

Ways to Reduce Tax Liability on Pension

• Standard Deduction: Pensioners over 60 can claim a standard deduction of Rs50,000. For individuals under 60, a deduction of Rs40,000 is allowed.

• Section 80C Investments: Investing in PPF, NPS, and other qualified products can provide deductions of up to Rs1.5 lakh.

• Medical Insurance (Section 80D): Medical insurance premiums can offer deductions, especially for senior citizens, up to Rs50,000.

• Interest Income (Section 80TTB): Senior citizens can avail of a deduction of up to ?50,000 on interest income from deposits.

Things to Know While Filing Pensioners’ ITR

• Tax on Commuted Pension: For government employees, the commuted pension is fully exempt. For private-sector employees, it’s partially exempt depending on the circumstances.

• Family Pension: It is taxable under "Income from Other Sources." Family pensioners can claim a deduction of up to Rs15,000 or one-third of the pension amount, whichever is lower.

• Exemptions for Senior Citizens: Section 194P exempts senior citizens aged 75 or above from filing ITR if they only have pension and interest income from the bank.

Conclusion

Filing an ITR is crucial for pensioners to stay compliant with tax regulations and avoid penalties. Knowing which form to use, understanding available deductions, and seeking professional assistance can make the process seamless.

Anil D’Souza & Associates (ADCA) is a premier chartered accountancy firm specializing in a comprehensive range of financial services, including income tax return filing for pensioners, GST compliance, and accounting solutions. With years of experience, ADCA ensures that pensioners navigate through the complexities of income tax with ease and efficiency. Their team of experts provides personalized guidance on minimizing tax liability, maximizing deductions, and simplifying the filing process. Trust ADCA for all your tax-related needs and secure a worry-free financial future.

Frequently Asked Questions (FAQs)

1. Which ITR to be filed for pensioners?

Pensioners usually need to file ITR-1 (Sahaj) if they receive pension and interest income, and their total income does not exceed Rs50 lakh in a financial year. However, if they have additional sources of income, like capital gains or own more than one house property, they should opt for ITR-2.

2. How to show retirement benefits in ITR?

• Pension: Report pension income under the "Income from Salary" section in the ITR form.

• Gratuity, Commuted Pension, and Leave Encashment: These are partially or fully exempt under Section 10. The exempt portion should be entered under the "Exempt Income" section.

• Uncommuted Pension: This is fully taxable and should be included under "Salary" in the ITR.

3. What is Section 10 10A of the Income Tax Act?

Section 10(10A) of the Income Tax Act provides the tax exemption on commuted pension:

• For government employees, the entire commuted pension amount is exempt.

• For non-government employees, the exemption is one-third of the commuted pension if gratuity is received and half of the commuted pension if gratuity is not received.

4. What is the deduction for pensioners?

Pensioners can claim a standard deduction of Rs50,000 on their pension income. This deduction is automatically considered during the tax calculation. They can also claim other deductions under sections like Section 80C (for investments such as PPF, NSC, etc.), Section 80D (for medical insurance premiums), and Section 80TTB (interest income from savings).

5. How to save tax on pension?

• Investments under Section 80C: Invest in schemes like PPF, NPS, ELSS, or NSC to claim deductions of up to Rs1.5 lakh.

• Section 80D: Deduct premiums paid for medical insurance for self, spouse, and dependents.

• Section 80TTB: Senior citizens can claim a deduction of up to Rs50,000 on interest income from savings accounts and fixed deposits.

• Standard Deduction: Utilize the Rs50,000 standard deduction on pension income.

6. What is the income tax exemption limit for pensioners?

The exemption limit varies based on age:

• For individuals below 60 years, it is Rs2.5 lakh.

• For senior citizens (60 to 80 years), it is Rs3 lakh.

• For super senior citizens (above 80 years), it is Rs5 lakh.Pensioners should make the most of these exemptions and deductions to optimize their tax savings effectively.