Pension: Income Tax Return For Pensioners For FY 2023-24

Pension means a regular payment, made to retired individuals from an investment fund to which an employer has contributed during their working life.

How Pension Incomes Are Taxable?

Pension incomes are totally depends on the type of pension receive. Pensioners can avail of tax deductions to reduce their taxable income

  • Standard Deduction – Amount: ₹50,000
  • Section 80C – Limit is up to ₹1.5 lakhs
  • Section 80CCD(1B) – Limit up to ₹50,000 for contributions to the National Pension System (NPS).
  • Section 80D – Limit up to ₹25,000 for health insurance premiums for self, spouse, and dependent children. Additional ₹50,000 for premiums for senior citizen parents.
  • Section 80DD – Limit upto ₹75,000 for expenses related to the medical treatment, training, and rehabilitation of a disabled dependent. ₹1.25 lakhs for severe disability.
  • Section 80DDB – Limit is up to ₹40,000 for medical treatment of specified diseases. ₹1 lakh for senior citizens.
  • Section 80TTB – Limit up to ₹50,000 for interest on deposits for senior citizens.
pension income

How To Calculate Pension Incomes?

Pension income is taxed as per the applicable income tax slabs and rates.

Let us take an example to get an idea how to calculate-

Example :

Mr. Ayush Gupta is 66 years old and a retired person. He receives a monthly pension and the details are –

Monthly Pension received ₹60,680
Monthly Pension before commutation ₹1,02,800
Dearness Relief 42% up to 30-06-23 and from 1-07-23 is 46%
Interest on deposit received ₹1,50,0000
Purchased NSC ₹1,00,000
Deposited in Bank for 5 years under Tax Saving Scheme ₹74,000
Annual premium on health insurance for self ₹76,000

Solution: For calculating tax under old regime

ParticularsAmount (Rs.)
Pension Income [60680*12] 728160
Dearness Relief
1-03-23 to 30-06-23 [102800*42%*4]172704
1-07-23 to 29-02-24 [102800*46%*8]378304
Income From Other Source
Interest on Deposit150000
Less : Deduction for interest(50000)
Less : Standard Deductions(50000)
Less : Deduction under 80C
NSC & FD Interest(150000)
Less : Deduction under 80D
Health Insurance Premium(50000)
Taxable Income1129168
Taxable Income after round off1129170
Tax Amount
Upto 3 LakhNIL
Upto 5 Lakh [200000*5%]10000
Upto 10 Lakh [500000*20%]100000
Balance [(1129170-1000000)*30%]38751
Total Tax148751
Cess @4%5950
Total Income Tax Payable154701

Solution: For calculating tax under new regime

Pension Income [60680*12]728160
Dearness Relief
1-03-23 to 30-06-23 [102800*42%*4]172704
1-07-23 to 29-02-24 [102800*46%*8]378304
Income From Other Source
Interest on Deposit150000
Less : Standard Deductions(50000)
Taxable Income after round off1379170
Upto 3 LakhNIL
Upto 6 Lakh [300000*5%]15000
Upto 9 Lakh [300000*10%]30000
Upto 12 Lakh [300000*15%]45000
Balance [(1379170-1200000)*20%]35834
Total Tax125834
Cess @4%5033
Total Income Tax Payable130867


Is a pension taxable income?

Yes, pension income is taxable under the head salaries.

What is the ITR limit for pensioners?

The ITR limit for pensioners is based on the total income and age.
For senior citizens (aged 60-80 years), income up to Rs 3,00,000 is exempted from tax. Beyond this, the tax rates are applicable in both Old Tax Regime and New Tax Regime (Default tax regime).

How to avoid TDS on pension?

Pension paid to retired employees are subject to TDS under the “Salary” income head. However, if income paid to family members of pensioners is classified as “income from other sources” and is not subject to TDS.

Who will give form 16 for pensioners?

For pensioner Form 16 is issued by the bank.

What is the exemption for pensioners?

Pensioners can claim a Rs. 50,000 deduction on pension income. In case of senior citizens, no tax is if income is up to Rs. 5,00,000 under old tax regime and under new tax regime limit is up to Rs. 7,00,000 and rebate can be claim up to Rs. 25,000.

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