Filing ITR for Pension Income and Savings Account Interest in India
- Nimisha Panda
- 1d
- 9 min read
Filing an income tax return for pension income combined with savings account interest requires clarity on how these two income streams are taxed under the Income Tax Act for FY 2024-25. Pension is treated as salary income, while savings interest falls under income from other sources, and both must be reported accurately. Seniors can also access additional deductions such as Section 80TTB, which reduces taxable interest income. Selecting the correct ITR form, understanding exemptions for specific age groups, and reconciling TDS details are essential steps. Digital platforms like TaxBuddy help streamline the process by auto-importing data and guiding correct reporting.
Table of Contents
Understanding Taxability of Pension Income
Pension received after retirement is treated as taxable income and usually classified under the head “Income from Salary,” as it is essentially a continuation of past employment compensation. This applies to government and private pensions alike, except when the amount is received as an annuity from an insurance provider, which is then considered “Income from Other Sources.” Pensioners are eligible for the standard deduction available to salaried individuals, bringing down the taxable portion. Family pension, on the other hand, is taxed differently with a fixed deduction allowed under Section 57. Understanding these classifications is essential because it influences form selection, eligibility for deductions, and how final tax liability is calculated.
Tax Treatment of Savings Account Interest
Savings account interest is classified as “Income from Other Sources” and must be reported even if it appears small or the bank has not deducted TDS. Interest earned from all savings accounts—public sector banks, private banks, cooperative banks, and post offices—needs consolidation under one disclosure. For senior citizens, the tax impact softens due to the enhanced deduction under Section 80TTB, whereas non-senior individuals may claim up to ₹10,000 under Section 80TTA. Reporting interest accurately is crucial because the AIS and bank-reported data often reflect the full interest amount, and inconsistencies may trigger notices or mismatches.
Choosing the Correct ITR Form for Pension + Savings Interest
Pensioners primarily use ITR-1 when income consists of pension and savings interest, provided total income falls within the prescribed limits and there is no capital gains or multiple-house property reporting. ITR-2 becomes necessary when additional income arises from property rent, capital gains, foreign assets, or higher-value deductions. Choosing the incorrect form often leads to processing delays or defective return notices. Digital platforms like TaxBuddy guide pensioners through form selection and prevent filing errors by automatically identifying the most appropriate ITR form based on the disclosed income structure.
Reporting Pension and Savings Interest in the ITR
Pension income is reported in the section dedicated to salary income, while savings interest is disclosed under “Income from Other Sources.” Combining the two ensures accurate tax liability computation, especially when TDS is already deducted on pension or fixed deposit interest. The taxpayer must reconcile Form 26AS, AIS, and bank interest certificates before entering values. AIS may show gross interest accruals, which must match the reported figures to prevent mismatch notices. TaxBuddy’s platform simplifies this by auto-importing Form 16, AIS, and TIS data so pensioners can avoid manual errors.
Using Section 80TTB for Savings Interest Deduction
Section 80TTB provides senior citizens with a deduction of up to ₹1,50,000 on interest earned from savings accounts, fixed deposits, and recurring deposits. This significantly reduces taxable interest income and is available exclusively to individuals aged 60 and above. Non-senior individuals may instead use Section 80TTA, which provides a deduction of up to ₹10,000 on savings account interest only. Pensioners must first report the entire interest income under “Income from Other Sources,” after which the deduction is applied while computing total income. This distinction is essential because AIS reports the gross figure, not the net deductible amount.
When ITR Filing Is Mandatory for Pensioners
ITR filing becomes mandatory when total income before deductions exceeds the basic exemption limit applicable to the chosen tax regime. Pensioners with pension plus savings interest must file ITR if the combined income exceeds the threshold or if tax has been deducted but a refund is due. Filing is also required when capital gains arise, foreign assets exist, or high-value financial transactions occur. Even if income is below exemption, filing can be beneficial to claim refunds on excess TDS, maintain financial records, and ensure accurate reporting across financial systems.
Is Filing ITR Required for Senior Citizens Under Section 194P?
Section 194P exempts certain senior citizens aged 75 and above from filing ITR if their only income sources are pension and interest received from the same bank that disburses the pension. In such cases, the bank calculates tax liability and deducts TDS after considering eligible deductions. This rule applies only when both income components come from one bank. If interest income originates from multiple banks, or if rent, capital gains, or business receipts exist, filing an ITR remains mandatory. Pensioners should verify eligibility carefully before relying on this exemption.
Documents Needed for Filing ITR for Pension and Interest Income
Accurate filing requires a set of essential documents: pension slips, Form 16 (if issued by the pension provider), bank statements, interest certificates from banks or post offices, Form 26AS, AIS, and TIS. Senior citizens must include proof of fixed deposit interest if claiming Section 80TTB. Copies of Form 15H or 15G, if submitted to prevent TDS, should also be retained for cross-verification. Maintaining complete documentation ensures smooth filing and reduces chances of mismatch notices.
How Banks Handle TDS on Pension and Savings Interest
Banks typically deduct TDS on fixed deposit and recurring deposit interest when the interest amount crosses the applicable threshold, while savings interest is not subject to TDS for most individuals. For senior citizens, the threshold rises to ₹50,000 per year. Pension payments, if routed through banks, may be subject to TDS depending on the taxable portion. Since AIS consolidates every bank’s reporting, pensioners must reconcile differences and ensure consistent reporting. Banks rely on PAN-linked data, making accurate KYC details essential to prevent reporting errors.
Role of Form 15G and Form 15H for Avoiding TDS
Form 15G applies to individuals below 60 years whose taxable income falls below the exemption limit, while Form 15H is for senior citizens. These forms notify banks not to deduct TDS on interest income if the overall taxable income remains within limits. Pensioners must submit the form at the beginning of the financial year to avoid unwanted TDS deductions. However, incorrect submission may result in compliance issues or interest liabilities later. Proper filing of these forms ensures smoother reporting during ITR preparation.
Filing ITR for Pensioners Through Digital Platforms like TaxBuddy
Digital platforms such as TaxBuddy simplify filing by auto-fetching income data, identifying applicable deductions, and choosing the correct ITR form. Pensioners often struggle with reconciling interest income across multiple accounts, and guided platforms remove this complexity. TaxBuddy’s mobile interface allows pensioners to upload documents, view tax summaries, and resolve mismatches quickly. The system highlights deduction opportunities, especially for senior citizens under Section 80TTB, ensuring the return is accurate and compliant.
Common Errors Pensioners Should Avoid While Filing ITR
Frequent mistakes include under-reporting savings interest, choosing the wrong ITR form, overlooking the standard deduction on pension income, or forgetting to claim Section 80TTB. Some pensioners ignore small bank accounts that still generate interest, leading to AIS mismatches. Discrepancies between Form 26AS, AIS, and manually-entered values can also cause notices. Filing without reconciling TDS entries or missing deadlines may result in penalties. Verifying all income sources and using guided platforms helps prevent these avoidable errors.
Conclusion
Accurately filing an income tax return for pension and savings account interest ensures correct reporting, maximises eligible deductions, and avoids compliance issues. Pensioners benefit significantly from provisions such as the standard deduction and Section 80TTB, making accurate disclosure even more important. Digital platforms like TaxBuddy offer simplified, guided filing for pensioners, helping ensure all income sources are reconciled and reported correctly. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy offers both self-filing and expert-assisted plans to suit different types of taxpayers. The self-filing option uses AI-driven automation to pre-fill income details, identify deduction opportunities, and highlight potential mismatches, making it suitable for individuals with straightforward income such as pension and savings interest. For those handling multiple income heads, senior citizen deductions, or complex reporting requirements, the expert-assisted plan assigns a dedicated tax professional who reviews documents, prepares the correct ITR form, and ensures accurate submission. Both plans provide easy document uploads, real-time tracking, and post-filing support.
Q2. Which is the best site to file ITR? The Income Tax Department’s official portal remains the primary platform for filing returns. However, taxpayers often prefer user-friendly alternatives that provide guided support, especially when managing multiple income sources such as pension, interest, and capital gains. Platforms like TaxBuddy simplify the process with automated data import from AIS, Form 26AS, and bank statements, reducing manual errors. Their interface helps pensioners and senior citizens understand deductions, claim benefits like Section 80TTB correctly, and avoid filing mistakes commonly seen with manual entries on the official website.
Q3. Where to file an income tax return? An income tax return can be filed either on the Income Tax Department’s e-filing portal or through reliable tax platforms like TaxBuddy. The government portal requires manual entry of income, deductions, and TDS details, while third-party platforms streamline these steps through auto-fetch features and guided prompts. This makes filing easier for pensioners, senior citizens, and individuals unfamiliar with technical tax forms. These platforms also offer faster issue resolution by highlighting mismatches in AIS/TIS and recommending corrective actions during the filing process.
Q4. Is pension income taxable under the old and new tax regimes? Pension income is taxable in both the old and new regimes. The tax calculation depends on the applicable slab rates of the chosen regime. Under the old tax regime, pensioners can claim the standard deduction and other eligible deductions, including Section 80TTB for senior citizens. In the new regime, most deductions are removed, but the basic exemption and slab structure differ. Pensioners must evaluate total income, interest earnings, and applicable deductions before choosing a regime to optimise tax liability.
Q5. How should savings account interest be reported while filing ITR? Savings account interest must be reported under “Income from Other Sources” after consolidating interest from all bank accounts. AIS often shows the full interest credited during the year, so figures should match this data to avoid automated mismatch alerts. Once the gross interest is reported, eligible individuals can claim deductions under Section 80TTA or Section 80TTB to reduce taxable income. Pensioners should collect interest certificates from banks and reconcile them with AIS before filing.
Q6. Which ITR form should a pensioner with pension + savings interest use? Pensioners with pension income and savings account interest typically use ITR-1, provided they meet the eligibility conditions. If they also have income from capital gains, multiple house properties, foreign assets, or high-value financial transactions, they must switch to ITR-2. The correct form ensures accurate reporting and faster processing, while using an incorrect form may result in defective return notices. Digital platforms often assist in auto-selecting the correct form based on the taxpayer’s disclosures.
Q7. Can senior citizens claim deductions on bank interest? Yes. Senior citizens aged 60 and above can claim a deduction of up to ₹1,50,000 under Section 80TTB for interest earned from savings accounts, fixed deposits, and recurring deposits. This significantly reduces taxable interest income. Individuals below 60 years are eligible for a lower deduction of up to ₹10,000 under Section 80TTA, which applies only to savings interest. Pensioners must report the total interest first and then apply the respective deduction while computing taxable income.
Q8. Can Form 15G or Form 15H help avoid TDS on savings or FD interest for pensioners? Form 15H allows senior citizens to request banks not to deduct TDS on interest if their total taxable income remains below the basic exemption limit. Form 15G applies to individuals below 60 years under similar conditions. These forms must be submitted at the start of the financial year and renewed annually. However, they should not be submitted if taxable income exceeds the exemption limit, as doing so may lead to compliance issues and interest liability later.
Q9. When is ITR filing not mandatory for pensioners? ITR filing is not mandatory for certain senior citizens aged 75 or above under Section 194P if their only income sources are a pension and interest from the same bank that disburses the pension. In such cases, the bank calculates the tax and deducts TDS after considering eligible deductions. If income originates from multiple banks, includes capital gains, rent, or business income, filing an ITR becomes mandatory regardless of age.
Q10. What happens if bank interest or pension income is under-reported? Under-reporting pension or interest income can trigger automated mismatch notices because AIS and Form 26AS capture information directly from banks and pension disbursement agencies. Failure to report interest from even minor savings accounts can result in intimation adjustments under Section 143(1), additional tax liabilities, penalties, or scrutiny. Reconciling figures with AIS/TIS and using guided platforms reduces the risk of omissions.
Q11. How to fix mismatches in AIS for pension or savings interest? AIS may sometimes reflect higher interest or duplicate entries when multiple accounts or FD renewals exist. Pensioners must verify interest certificates, compare entries, and use the feedback option in AIS if discrepancies are found. Corrections made by banks are updated in subsequent AIS cycles. During ITR filing, accurate values must be entered, and explanations should be provided if AIS differs from verified documents. Platforms like TaxBuddy assist in detecting mismatches and guiding corrective steps.
Q12. How can digital platforms like TaxBuddy help pensioners file ITR correctly? Digital platforms simplify the process by automatically importing income, TDS, AIS, and Form 26AS details into the return. They identify applicable deductions, highlight errors before submission, and ensure the correct selection of ITR forms. Pensioners benefit from guided prompts, secure document uploads, and expert validation in the assisted plan. These features help prevent common filing errors and ensure accurate reporting across pension and interest incomes.
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