This article explains about income tax rules for pensioners for FY 2025-26 with ITR filing in AY 2026-27.
What is Financial Year and Assessment Year?
The Financial Year is the 12-month period from 1 April to 31 March in which income is earned such as pension, salary, rental income, capital gains or dividends. Whereas the Assessment Year is the year in which income is assessed (immediately after financial year) and tax return is filed.
For Example
If a person earns pension between 1 April 2025 and 31 March 2026 then it falls in FY 2025–26. This income is then reported and taxed in the AY 2026–27.
Components of Total Tax Liability
Total tax comprises in three parts:
Income Tax
There are two regimes New Regime (default under Section 115BAC, fewer deductions) vs. Old Regime (optional—opt out/in by 31 July of AY). New regime distinguishes normal income such as pension, salary, rent, interest, business, short-term property gains etc taxed at slab rates vs. special rate income such as STCG 111A, LTCG 112A/112, wining income etc. Old regime lacks this split but allows more deductions.
Pensioners can opt for old or new regime regardless of age, they may be non-senior (<60), senior (60-79) or super senior (80+).
Old Tax Regime Slabs
| Income | Non-Senior (<60) | Senior (60-79) | Super Senior (80+) |
| Upto 2.5Lakh | 0% | 0% | 0% |
| 2.5Lakh - 3Lakh | 5% | 0% | 0% |
| 3Lakh - 5Lakh | 5% | 5% | 0% |
| 5Lakh - 10Lakh | 20% | 20% | 20% |
| Above 10Lakh | 30% | 30% | 30% |
New Tax Regime Slabs
Uniform slabs for all pensioners/seniors/super seniors (no age-based exemptions beyond rebate).
| Income Slab | Tax Rate |
| Up to 4L | Nil |
| 4-8L | 5% |
| 8-12L | 10% |
| 12-16L | 15% |
| 16-20L | 20% |
| 20-24L | 25% |
| Above 24L | 30% |
Surcharge
Surcharge applies if total income is above Rs 50L
| Income (Rs ) | Rate under Old Tax Regime | Rate under New Tax Regime |
| 50L-1Cr | 10% | 10% |
| 1-2Cr | 15% | 15% |
| 2Cr-5Cr | 25% | 25% |
| Above 5Cr | 37% | 25% |
Health & Education Cess
Cess is always 4% on income tax + surcharge.
Rebate u/s 87A and Marginal Relief
- Old regime: Up to Rs 5L income get full rebate.
- New regime: Up to Rs 12L total income, rebate = lower of tax or Rs 60,000 (no tax/cess).
| Particulars | Income ≤ Rs 12,00,000 | Income little above Rs 12,00,000 (Marginal Relief Case) | Income much above Rs 12,00,000 |
| Residential status | Resident Individual | Resident Individual | Resident Individual |
| Tax regime | Default / New Regime (115BAC) | Default / New Regime (115BAC) | Default / New Regime (115BAC) |
| Total Income (Rs ) | Up to 12,00,000 | Example: 12,10,000 | Example: 13,00,000 |
| Income above Rs 12 lakh (A) | NIL | 10,000 | 1,00,000 |
| Tax as per slab rates (B) | 60,000 or less | 61,500 | 75,000 |
| Condition (B>A?) | Not applicable | Yes | No |
| Rebate u/s 87A | Lower of tax or Rs 60,000 | 51,500 | NIL |
| Maximum rebate allowed | Rs 60,000 | Limited to tax payable | Not available |
| Tax after rebate (before cess) | NIL | 10,000 | 75,000 |
| Health & Education Cess (4%) | NIL | 400 | 3,000 |
| Final Tax Payable | NIL | 10,400 | 78,000 |
| Meaning in simple words | Full rebate available | Pay tax only on extra income | Pay full tax amount |
Advance Tax Payment
Seniors or super seniors are exempt from advance tax unless they have business income above the threshold. Non-senior taxpayers must pay advance tax by 31 March, otherwise interest under sections 234B and 234C applies. If no advance tax is required or short paid, the balance tax can be paid as self-assessment tax at the time of filing the ITR.
CAclubindia
