How to File ITR for Pensioners?

  • Author :
  • TATA AIG Team
  • Published on :
  • 02/01/2024

Retirement brings new opportunities and challenges. With their unique financial circumstances, pensioners need to understand the nuances of the filing process to ensure compliance with regulations and maximise their economic well-being.

Income Tax return filing for pensioners can be arduous. Also, calculating taxes on the pension can take time and effort. This article aims to simplify various aspects of how pensioners can file the ITR.

We shall explore how different types of pensions are taxed, the steps for filing the ITR, and discuss how pensioners can reduce their tax liability. This knowledge will be equally helpful for new retirees and pensioners managing pension money for years.

Tax Provision on Pension

Like monthly earnings, pension income is taxable under the Income Tax Act of 1961 under the head salary. Therefore, all pension earners must file an income tax return for the period of receiving a pension to claim tax deducted from it.

Pension is divided into two parts: commuted and uncommuted pension. A commuted pension is a lump sum pension received at once, while an uncommuted pension is received monthly or yearly as a regular payment.

Tax Provision Uncommuted Pension Commuted or Lump Sum Pension
For Private Sector Employees Taxable Just as Salary Partially Exempt*
For Government Employee Taxable Just as Salary Fully Exempt

*Taxability in case of Gratuity Income for commuted pension for Private Sector Employees is as follows:

Condition Scope Tax Implication
A person receives both gratuity and pension 100% of the pension was commuted 1/3rd of the pension amount is exempt; the remaining is taxed as salary.
A person does not receive gratuity but receives only a pension 100% of the pension was commuted If 100% of the pension was commuted

Uncommuted pension or any periodic pension payment is fully taxable as salary.

Amendment: A proposal has been made to exempt senior citizens from filing ITR forms for senior citizens if pension and interest income are their sole annual income sources.

A new Section 194P has been inserted to compel banks to deduct tax on senior citizens aged over 75 years with pension and interest income from the bank.

Things to Know While Filing Pensioners’ ITR

Below are some things you need to consider while filing returns for your pension income.

ITR Type

ITR 1- Sahaj

For all salary-income individuals, Income Tax Form 1 is filed. As a pension is a type of salary received after a particular period of service at the organisation, a pension is considered as salary income for tax calculation. Similar to salary, the ITR for a retired person will be ITR 1- Sahaj.

Documents Required

The following documents are required for ITR 1 Filing:

Form 16 and Form 16 A - Form 16 and 16 A covers all salary, bifurcation and tax deducted in the financial year. The company HR provides this at the year's end.

26 AS (For Documented Income Verification) - 26 AS is the statement that shows TDS deducted and information about TCS. It is an optional document to verify the TDS deduction on the salary. It can be downloaded after logging into the Income-tax portal under the ‘Services’ tab.

For Deduction - Pan number if any payment is made to claim deduction and other details of amount and date will be required. Donation Receipts, Insurance Payments, Mutual Fund Investments.

Head of Income

The head of income where pension income will be recorded is “Income From Salary”. Selecting a Salary head during income tax return filing for pensioners.

Standard Deduction

Standard deduction on a pension is allowed up to ₹50,000 for individuals above 60 years of age. This can be claimed while filing ITR for senior citizens.

For employees below 60 years, ₹40,000 is allowed as a deduction on the total salary income. For a family pension, ₹15,000 is allowed for deduction in any applicable while filing a pensioner ITR Form.

Step-by-Step Process of Filing ITR Form for Pensioners on Income Tax Portal

Part A

Logging in and Adding details

Log in to your income tax portal here.

Select the E-filing Tab in the Menu Bar.

Go to ‘Income tax Return’ and click ‘File Income Tax Return’.

Select the relevant Assessment year and then select the ‘Online Mode’ of filing (when computation is not done).

Click on Continue and then either ‘Resume filing’ (if already started) or ‘Start Filing’ the pensioner ITR form and proceed.

Part B

Filing of Income Tax Return

Choose your application status as ‘Individual’ and continue.

On the right in the drop-down menu, select ‘ITR 1- Sahaj.’

Once the screen loads, review the necessary documents list and click "Let’s Get Started."

Tick all the relevant checkboxes and proceed by clicking on "Continue." Select your preferred tax regime, either the old tax regime or the new one.

Review and make necessary edits in each section; then click 'Continue' to proceed.

Part C

Adding Deduction

Deductions allowed under ITR 1 are all from section 80C to 80 U, except for old regime filing. These deduction options include investments, Mediclaim, LIC Premium, Tuition Fees, Contributions to Pension Accounts, Education Loans, Donation, and more.

This segment also encompasses Taxable Income, calculated by subtracting the Total Deductions from the Gross Total Income.

If you have any exempt income, please select applicable exempt income earned during the previous year from the dropdown list.

Part D

Verification and Completion

After entering income and deduction details in all sections, click "Proceed." If you have a tax liability, the screen will display the details.

If payable, choose either "Pay Now" or "Pay Later" based on your preference. If you select "Pay Now," choose a banking services provider and click "Continue." You'll receive a confirmation message after successful payment. Click on “Back To Return Filing” and then select the “Preview Return” button.

Click on the declaration checkbox on the "Preview and Submit Your Return" page. Enter TRP information or leave it blank if you do not have one. Select “Proceed to Preview” and verify all information.

Click on “Proceed to Validation.” If there are errors, go back and correct them.

After checking/correcting information, press “Proceed to Verification.”

On the “Complete your Verification” page, choose “e-Verify Now,” “e-Verify Later,” or “Verify via ITR-V” (for late filing). It's recommended to select the first option and press "Continue.”

The screen will confirm the successful filing and verification of your ITR. If you plan to complete e-verification later, note that ITRs filed after August 1, 2022, have a 30-day verification window.

Note that this process must only be followed if all details you see already added are numerically and factually correct. If you know the requirement to change those details, please do the essentials with the help of a professional or a chartered accountant.

Ways to Reduce Tax Liability on Pension

While filing ITR for pensioners, here are certain ways to incorporate these measures to decrease your tax liability in the financial year:

Investment in Qualified Products

Section 80C: Under the old tax regime, you can invest a certain amount of your savings in schemes like the National Pension Scheme(NPS), Senior Citizen’s Saving Scheme(SCSS), and Public Provident Fund(PPF). The maximum deduction for section 80C amounts to ₹1.5 lakhs.

Deduction on Medical Insurance Premium

Section 80D: If you have any of your family members falling under the category of senior citizens, you can buy medical insurance to reduce your tax liability by ₹50,000 you pay per year. This helps get tax benefits by ensuring you and your loved ones have health insurance.

With tax benefits, health insurance primarily safeguards your health financially. It covers expenses required for treating diseases or illnesses so that the assessee can simultaneously be relieved from paying heavy medical charges.

At Tata AIG, we provide facilities for online purchase of various health insurance plans. To check the insurance premium cost you can also use our health insurance calculator while purchasing coverage.

Senior Citizen Deduction

Section 80 TTB: If you have any savings in banks, cooperative societies and post offices, as a senior citizen, you can reduce your tax liability by up to ₹50,000 on the interest earned on your deposits. In other words, you will not have to pay taxes on some interest earned.

Deduction on Hospital Expenses

80DDB: If you are a senior citizen and have dependents(like children, spouse or parents) suffering from serious diseases like Cancer or AIDS, you can pay for their medical bills and avail of a deduction for up to ₹1 lacs for the money spent on medication and treatment.

Conclusion

Managing taxes as a pensioner can be a manageable task. You can easily navigate through this scenario if you familiarise yourself with the provisions for pensions, know the correct ITR form to use, and take advantage of the optimum benefits of the available exemptions and deductions. This will help you efficiently manage your tax filings and reduce your liabilities.

It is wise to stay informed and plan for the future for a smooth and stress-free financial journey post-retirement.

FAQS

Till when can we file a Late ITR?

It is better to file an ITR before the due date, but if late, an ITR has to be filed in any case, according to section 139(4) of the Income Tax Act, 1961, within 3 months of the end of the relevant assessment year. While choosing the ITR form, you must select 139(4)- Belated ITR.

Is tax filing mandatory for pensioners?

Pension is taxable under the head salaries in your ITR. According to the rules of taxation, an uncommuted pension is viewed as a salary under the Income Tax Act of 1961, and therefore, pension earners are required to file an Income Tax Return. For claiming TDS on a pension, one should always file an ITR.

Section 194P of the Income Tax Act of 1961 provides conditions for exempting senior citizens from filing income tax returns aged 75 years and above. Conditions for exemption are as follows: senior citizens should be 75 years or above.

Do I have to File ITR as a government pensioner?

If you receive a commuted pension, a nil ITR can be filed as a commuted pension received from the government is exempt. If you receive an uncommuted pension, then ITR 1 has to be filed.

How should family pensioners file their ITR?

While filing the ITR, family pensioners should select “Family Pension” from the other income sources from the drop-down menu in the Gross Total Income section of the ITR Form 1 to file their income tax return.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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