Query regarding retirement benefits

281 views

Save Share

sukhwinder sharma

9 Points Posted on 15 July 2026

I have a query regarding that an Govt. employeed retired in Oct. 2024 and all his retirements benefits were paid in the financial year 2025-26 but i have shown his retirement benefits when they were due that is the ITR filed for the FY 2024-2025(at that time those retirement benefits were not visible in the 26AS or AIS of the FY 2024-25 but now they are visible in the FY 2025-26 AIS and 26 AS what should i do now? should i file the updated return for the FY 2024-25 or any other solution which is recommended in this case.

Replies (3)

Quick Summary

This discussion addresses a query about reporting retirement benefits for a government employee who retired in October 2024. While benefits were paid in FY 2025-26, they were initially reported in FY 2024-25. The consensus is that benefits are taxable upon receipt, so reporting in FY 2024-25 was incorrect. No updated return is needed for FY 2024-25; instead, provide feedback on the FY 2025-26 AIS. Crucially, the discussion highlights the importance of claiming Section 89 relief for lump-sum payments by filing Form 10E before your ITR to mitigate higher tax slabs, and also mentions exemptions under Sections 10(10) and 10(10AA) for gratuity and leave encashment.

Aashok Kumar Sharma

Finance/Compliance Consultant

69118 Points Posted on 15 July 2026

Since salary/retirement benefits are taxable on a due or receipt basis, whichever is earlier, your reporting in FY 2024-25 was legally correct. Do not file an updated return for FY 2024-25. Instead, log into the portal and submit online feedback in the FY 2025-26 AIS stating that this income was already reported in the previous financial year. If a mismatch notice is generated for FY 2025-26, simply submit a response explaining that the tax was already accounted for on a due basis, backed by the retirement order and your FY 2024-25 ITR copies.

Tax Garden

Tax Consultant

1627 Points Posted on 16 July 2026

The existing reply is correct , retirement benefits are taxable in the year of RECEIPT, not when they became due. Report in FY 2025-26 (AY 2026-27). No updated return for FY 2024-25 is needed.

However, there is one more important step: Section 89 RELIEF.

When you receive salary arrears or deferred retirement benefits in a lump sum in one year, it can push you into a higher tax slab than if you had received the income spread across the years it related to. Section 89 of the Income Tax Act compensates for this.

How to claim it:

1. File Form 10E on the income tax portal BEFORE filing your ITR. If you file the ITR first, the department disallows the Section 89 claim and raises a demand.

2. Form 10E has a table where you recalculate tax as if the amount was received in the respective years. The difference is the Section 89 relief.

3. Enter the relief amount in Schedule 10E of your ITR.

This is not automatic , you have to actively compute and claim it. For government employees with gratuity and leave encashment, there are also separate exemptions under Sections 10(10) and 10(10AA) which need to be applied first before computing the taxable balance.

For a full walkthrough of pension, gratuity, and leave encashment taxation rules for AY 2026-27, this [pension and retirement income tax guide](https://taxgarden.in/blog/income-tax-on-pension-india-ay-2026-27-commuted-uncommuted-family) covers the exemption limits and Form 10E process.