Income Tax for Pensioners
in India (FY 2025-26)
How pension is taxed, the Rs75,000 standard deduction, commuted pension exemption, Section 80TTB, family pension rules and every senior citizen benefit for AY 2026-27.
Pension from a former employer is taxed as salary. Pensioners get a standard deduction of Rs75,000 (new regime) or Rs50,000 (old). Under the default new regime for FY 2025-26, a Section 87A rebate makes tax nil up to Rs12,00,000 taxable income — so a pensioner with no other income pays no tax on pension up to about Rs12.75 lakh. Commuted pension of government employees is fully exempt.
How Each Type of Pension Is Taxed
Pension is not one thing. Uncommuted (monthly) pension, commuted (lump-sum) pension and family pension are each taxed differently. This table maps every common case for FY 2025-26.
| Type of Pension | Taxable Under | Exemption / Deduction |
|---|---|---|
| Uncommuted (monthly) pension | Salaries | Standard deduction Rs75,000 new / Rs50,000 old |
| Commuted pension — Govt employee | Salaries | Fully exempt — Sec 10(10A)(i) |
| Commuted — private (with gratuity) | Salaries | 1/3rd of commuted value exempt |
| Commuted — private (no gratuity) | Salaries | 1/2 of commuted value exempt |
| Family pension | Other Sources | 1/3rd or Rs25,000 new / Rs15,000 old (lower) |
| NPS / annuity pension | Salaries / Other Sources | Taxable when received; no separate exemption |
| UPS (Unified Pension Scheme) | Salaries | Taxable as pension; standard deduction applies |
Applies to FY 2025-26 (AY 2026-27) under the Income-tax Act, 2025. Verify your case on the official portal before filing.
From AY 2025-26 the Section 57(iia) family-pension deduction was raised to Rs25,000 under the new regime (it stays Rs15,000 in the old regime). Family pension is taxed under "Income from Other Sources" and does NOT get the Rs75,000 salary standard deduction.
New Regime vs Old Regime for Pensioners
The new regime is the default from FY 2023-24. It has lower slabs and a bigger Rs75,000 standard deduction, but drops most Chapter VI-A deductions. The old regime keeps 80C, 80D, 80TTB and the senior-citizen higher basic exemptions. Pensioners can still opt for the old regime by choosing it while filing.
New regime — nil tax up to Rs12L
- Standard deduction Rs75,000
- Slabs: nil to Rs4L, then 5% to 30%
- 87A rebate makes tax nil up to Rs12L taxable
- No 80C / 80D / 80TTB
- Basic exemption Rs4L for all ages
Old regime — deduction-driven
- Standard deduction Rs50,000
- 80C, 80D, 80TTB (Rs50,000) available
- Senior 60-79: Rs3L basic exemption
- Super-senior 80+: Rs5L basic exemption
- 87A rebate only up to Rs5L taxable
Rule of thumb: a pensioner with little to deduct is usually better off in the new regime. A senior with large 80C investments, health insurance, home-loan interest or big FD interest (80TTB) may still save more in the old regime — run both.
Not sure which regime saves you more on your pension?
Compare Old vs New →Pension Tax — Rs10,00,000 a Year
A 65-year-old pensioner with Rs10,00,000 annual pension and no other income, compared across both regimes for FY 2025-26.
New regime (default)
Old regime (65 yrs, no 80C)
With no deductions to claim, the new regime wipes out the tax entirely via the 87A rebate. The old regime only wins once 80C/80D/80TTB and other deductions are large enough to pull taxable income well below the new-regime figure. Use the FY 2025-26 calculator for your exact numbers.
A salaried-style pensioner in the new regime pays zero tax up to about Rs12.75 lakh of pension (Rs12L taxable + Rs75,000 standard deduction). But TDS may still be deducted by the disbursing bank — file your ITR to claim any refund.
Senior Citizen Tax Benefits
Pensioners aged 60+ get extra reliefs, most of which sit in the old regime. The new regime gives everyone a flat Rs4,00,000 basic exemption but does not offer the higher senior/super-senior slabs.
| Benefit | Who qualifies | Amount / Rule |
|---|---|---|
| Higher basic exemption (old regime) | Senior 60-79 yrs | Rs3,00,000 |
| Higher basic exemption (old regime) | Super-senior 80+ yrs | Rs5,00,000 |
| Section 80TTB — interest deduction | Senior 60+ yrs | Up to Rs50,000 on FD/RD/savings interest |
| TDS threshold on FD interest (194A) | Senior 60+ yrs | Rs1,00,000/yr (Budget 2025) vs Rs50,000 others |
| Form 15H — stop TDS | Senior 60+ yrs | Submit to bank if total income below taxable limit |
| Advance tax exemption (Sec 207) | 60+ with no business income | Pay only at time of filing |
| Paper ITR filing | Super-senior 80+ yrs | May file physical ITR-1 / ITR-4 |
80TTB and the higher senior/super-senior basic exemptions are available only under the old regime. Verify the current 194A TDS threshold before relying on it.
Aged 60+? See every relief in one place.
Senior Citizen Tax Guide →Family Pension — Taxed Differently
Family pension is paid to the surviving spouse or dependants of a deceased employee. It is taxed under "Income from Other Sources", not salary, so it does not get the Rs75,000 standard deduction. Instead, Section 57(iia) allows a deduction of one-third of the pension or Rs25,000 (new regime) / Rs15,000 (old), whichever is lower.
- Example (new regime): family pension Rs90,000 → 1/3rd = Rs30,000, capped at Rs25,000 → Rs65,000 taxable.
- A family pensioner cannot claim the salary standard deduction or receive Form 16 from the disbursing authority.
- Family pension of certain armed-forces / gallantry-award families can be fully exempt under Section 10(19).
TDS on Pension and ITR Filing
Pension is disbursed under a Pension Payment Order (PPO). The paying bank/treasury deducts TDS under Section 192 after the standard deduction and any deductions you declare. Submit a declaration at the start of the year so the bank computes TDS correctly.
Most pensioners file ITR-1 (Sahaj) — pension, interest and one house property. Capital gains or more than one house need ITR-2. Even if tax is nil, file to reclaim TDS the bank deducted on FD interest.
Banks deduct TDS on FD interest regardless of your total tax liability. The only way to get that money back is to file an ITR and claim the refund — do not skip filing just because your pension is tax-free.
Income Tax for Pensioners — FAQs
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