How to File ITR for Pension Income and Claim Exemptions
- PRITI SIRDESHMUKH
- Nov 13, 2025
- 10 min read
Filing an Income Tax Return (ITR) for pension income ensures that retirees remain compliant while optimizing tax savings through eligible exemptions. Pension income is taxable under “Income from Salaries,” and the filing process varies based on the type of pension received—regular or family pension. The correct choice of ITR form, deduction claims, and verification process helps pensioners reduce liability while staying within compliance timelines. With digital tools like TaxBuddy, the process is simplified, accurate, and up to date with the latest Budget 2025 changes.
Table of Contents
Understanding Pension Income and Its Taxability
Pension income is considered taxable under the head “Income from Salaries” as per the Income Tax Act, 1961. It represents a continuation of salary paid by the employer after retirement. There are two main types of pensions — regular pension and family pension. Regular pension is received by a retired employee directly from their employer or through a bank, while family pension is received by the legal heirs after the death of the employee.
Regular pension is fully taxable as salary income, whereas family pension is taxed under “Income from Other Sources.” For family pension, a deduction under Section 57 is allowed — either one-third of the pension received or ₹15,000, whichever is lower. Pensioners can also claim deductions under Sections 80C, 80D, and 80TTB if they choose the old tax regime.
Which ITR Form Should Pensioners Use for AY 2025-26?
For the Assessment Year 2025-26, most pensioners should file ITR-1 (Sahaj). This form is suitable if the total income is up to ₹50 lakh and the sources include pension, one house property, and income from other sources like bank interest.
However, if a pensioner has capital gains, multiple properties, or foreign income, they must use ITR-2. For those running a business or profession in addition to receiving a pension, ITR-3 or ITR-4 may apply. Choosing the right form ensures accurate disclosure and prevents the return from being marked as defective under Section 139(9).
Documents Required to File ITR for Pension Income
Before filing the return, pensioners should gather all relevant documents to ensure correct reporting and deduction claims:
Pension payment order or pension certificate
Form 16 (issued by the pension-paying bank or employer)
Bank passbook or statements showing pension credits
TDS certificate (Form 16A) if tax has been deducted
Investment proofs for deductions under Section 80C, such as LIC premium, PPF, or ELSS
Premium receipts for medical insurance under Section 80D
Interest certificate from banks for 80TTB claims
Having these documents ready helps in quick data entry and reduces errors during filing.
Step-by-Step Process to File ITR for Pension Income
Visit the official Income Tax e-filing portal at incometax.gov.in.
Log in using PAN, password, and captcha code.
Click on “File Income Tax Return.”
Select the assessment year as 2025-26.
Choose “Online” mode of filing.
Select “Individual” and choose the applicable ITR form (usually ITR-1).
Confirm your filing status as “Pensioner.”
Choose your tax regime — old or new.
Enter income details, deductions, and tax paid.
Review and validate the data before submission.
Make any pending tax payment, if required.
Complete e-verification using Aadhaar OTP, net banking, or bank account.
This process ensures the return is filed correctly and within the due date to avoid late filing penalties under Section 234F.
Reporting Pension Income Under the Right Head
Pension income should be reported under “Income from Salaries.” In the income details section, select “Pensioners” as the nature of employment. Enter the total pension received during the year as reflected in Form 16 or bank statements.
For family pension, it must be declared under “Income from Other Sources” and not under salary. The deduction under Section 57 — the lesser of one-third of the pension or ₹15,000 — should be applied automatically. This correct categorization ensures accurate tax computation and avoids mismatch with Form 26AS and AIS data.
How to Claim Deductions and Exemptions for Pensioners
Pensioners are eligible to claim several deductions under the old tax regime. Key ones include:
Section 80C: Deductions up to ₹1.5 lakh for investments in PPF, NSC, life insurance, and ELSS.
Section 80D: Deductions for medical insurance premiums up to ₹25,000 for individuals and ₹50,000 for senior citizens.
Section 80TTB: Interest income on deposits up to ₹50,000 for senior citizens.
Section 24(b): Deduction on home loan interest up to ₹2 lakh for a self-occupied property.
However, under the new tax regime, most of these deductions are not available except for the standard deduction and employer’s contribution to NPS under Section 80CCD(2). Pensioners should compare both regimes before selecting one during filing.
Is Standard Deduction Allowed in the New Tax Regime?
Yes, the government allows a standard deduction under both regimes. For FY 2024-25 (AY 2025-26), the standard deduction is ₹50,000 under the old regime and ₹75,000 under the new tax regime.
This deduction is automatically applied against pension income, reducing the taxable amount. For pensioners with higher income, the increased deduction under the new regime offers better tax relief, though those with multiple investments might still benefit more under the old regime due to other claimable deductions.
How Family Pension Is Taxed and Reported
Family pension is received by a dependent family member after the death of the pensioner. It is taxable under “Income from Other Sources.” A specific deduction under Section 57 allows relief — the lower of one-third of the pension or ₹15,000.
For example, if the annual family pension is ₹45,000, the deduction will be ₹15,000, and ₹30,000 will be taxable. If the pension is ₹30,000, one-third (₹10,000) will be deducted, and ₹20,000 will be taxable. The family member should also check whether TDS has been deducted by the paying bank and reflect the same while filing ITR.
Section 194P: ITR Exemption for Senior Citizens Above 75 Years
Section 194P provides relief to senior citizens aged 75 years or above who earn only pension and interest income from the same bank. In such cases, they are not required to file an ITR if:
The bank deducts TDS on total income after considering deductions under Chapter VI-A, and
A declaration is submitted to the bank confirming that the income is limited to pension and interest.
This provision aims to simplify compliance for elderly taxpayers who have fixed, non-complex income sources.
Calculating Tax Payable and Making Online Payments
After entering all income and deduction details, the system auto-calculates the total tax liability. Pensioners must verify whether TDS already deducted covers the liability. If there’s a shortfall, the balance tax can be paid online through the “e-Pay Tax” option available on the portal.
Once payment is successful, the challan details (BSR code and serial number) should be entered in the ITR form. Pensioners should ensure that advance tax or self-assessment tax is correctly credited to avoid notices or interest under Sections 234B and 234C.
Verifying and Submitting ITR for Pension Income
After filing, the return must be verified within 30 days to complete the process. Pensioners can e-verify using:
Aadhaar OTP
Net banking
Bank account verification
Demat account
Alternatively, the signed ITR-V form can be sent to CPC Bengaluru by post. Non-verification within the timeline renders the ITR invalid. Once verified, an acknowledgment is generated, confirming successful submission.
Common Mistakes Pensioners Should Avoid While Filing
Selecting the wrong ITR form (e.g., using ITR-1 when there are capital gains)
Not updating bank details for refund credit
Failing to report interest income from savings or fixed deposits
Choosing the wrong tax regime without comparison
Missing e-verification within 30 days
Forgetting to claim the standard deduction or relevant exemptions.
Avoiding these common errors ensures smoother processing and prevents defective return notices.
Why Using TaxBuddy Simplifies ITR Filing for Pensioners
TaxBuddy simplifies ITR filing by combining AI-powered automation with expert assistance. Pensioners can upload Form 16 or pension details, and the platform auto-fills income data, identifies applicable deductions, and checks for mismatches.
It also provides real-time guidance for choosing the right tax regime, ensures accurate reporting under the correct head, and verifies deductions before submission. TaxBuddy’s experts assist in claiming standard deductions and Section 80 benefits, making the entire filing process seamless and error-free.
Conclusion
Filing ITR for pension income is a crucial step to ensure compliance and maximize eligible benefits. Pensioners should report income under the right head, claim standard deductions, and evaluate both regimes before submission. Digital tools and expert-backed platforms like TaxBuddy make the process simple, fast, and accurate.
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 cater to different types of taxpayers. The self-filing plan is ideal for pensioners with straightforward income structures, such as regular pension and small savings interest. This plan uses AI-driven automation to pre-fill data, check for errors, and guide users step by step. The expert-assisted plan, on the other hand, connects users with certified tax experts who review the return, ensure accurate deductions, and handle any complexities such as multiple income sources or family pension reporting. This dual offering allows pensioners to choose the plan that best suits their comfort level and filing requirements.
Q2. Which is the best site to file ITR?
The official Income Tax Department’s e-filing portal (incometax.gov.in) remains the primary and statutory platform for filing income tax returns. However, many taxpayers prefer using advanced third-party platforms like TaxBuddy for added convenience and automation. TaxBuddy simplifies the entire process by importing Form 16 and bank details automatically, suggesting deductions, validating TDS entries, and ensuring compliance with the latest tax laws. It minimizes human error and provides guided filing with expert support, making it a preferred choice for pensioners who seek both accuracy and ease.
Q3. Where to file an income tax return?
An income tax return can be filed either directly on the government’s official portal, incometax.gov.in, or through registered tax-filing platforms such as TaxBuddy. Filing through TaxBuddy offers an advantage since it integrates data from PAN, Aadhaar, Form 16, and AIS to auto-populate income and deduction details. It also provides real-time validation and expert assistance in case of queries. Pensioners can file their ITR entirely online through desktop or mobile devices, ensuring compliance without the need to visit any physical tax office.
Q4. Which ITR form should be used for pension income?
Most pensioners should file using ITR-1 (Sahaj), which is suitable for individuals with income up to ₹50 lakh from pension, one house property, and other sources such as interest from savings or fixed deposits. However, if a pensioner has additional income like capital gains, more than one property, or foreign income, they must file ITR-2. In cases where pensioners are also self-employed or run a business, ITR-3 or ITR-4 may apply. Selecting the correct ITR form is essential to ensure the return is processed successfully without being flagged as defective.
Q5. How to show family pension in ITR?
Family pension, received by the dependent of a deceased employee, must be declared under “Income from Other Sources” and not as salary. While it is taxable, a deduction is available under Section 57 of the Income Tax Act — either one-third of the pension amount or ₹15,000, whichever is lower. For example, if a family pensioner receives ₹45,000 annually, ₹15,000 can be claimed as a deduction, and the remaining ₹30,000 will be taxable. The pension-paying bank may also deduct TDS, which should be reflected in Form 26AS and included while filing the ITR to avoid mismatch issues.
Q6. Is standard deduction available for pensioners?
Yes, pensioners are entitled to claim the standard deduction under both the old and new tax regimes. For FY 2024–25 (AY 2025–26), the deduction is ₹50,000 under the old regime and ₹75,000 under the new regime. This deduction is automatically applied while calculating taxable income from salary or pension. It helps in reducing the overall tax liability and is available even if the pensioner does not have any other deductions under Chapter VI-A. Pensioners need not submit any separate proof or document to claim the standard deduction; it is system-generated while filing.
Q7. Can pensioners claim deductions under Section 80C?
Yes, pensioners opting for the old tax regime can claim deductions under Section 80C up to ₹1.5 lakh. Eligible investments include contributions to PPF, NSC, ELSS mutual funds, life insurance premiums, and repayment of principal on a home loan. These deductions can substantially reduce taxable income, especially for retirees with investment-based savings. However, under the new tax regime, Section 80C deductions are not available, as the regime offers lower tax rates in exchange for fewer exemptions. Pensioners should compare both regimes before selecting one that minimizes their tax outgo.
Q8. Is family pension taxable in both regimes?
Yes, family pension is taxable under both the old and new tax regimes. The mode of reporting remains the same under “Income from Other Sources.” However, the Section 57 deduction — one-third of the pension or ₹15,000, whichever is lower — applies under both regimes, providing relief to family pensioners. Those who opt for the new regime can still claim this deduction, unlike other exemptions that are restricted. Family pensioners should also ensure that TDS details are accurately reflected in Form 26AS before filing the return to prevent any processing delays or mismatches.
Q9. Are senior citizens exempt from ITR filing?
Senior citizens above 75 years of age may be exempt from filing ITR under Section 194P if they meet specific conditions. The exemption applies only when their income consists solely of pension and interest from the same bank account. The bank must deduct the applicable tax after considering deductions under Chapter VI-A (like 80C, 80D, 80TTB). To avail this benefit, the senior citizen must submit a declaration to the bank confirming no other income sources. This provision simplifies tax compliance for elderly individuals and eliminates the need for them to file returns manually.
Q10. Can pensioners use the new tax regime?
Yes, pensioners can choose the new tax regime under Section 115BAC while filing their ITR. The new regime offers simplified tax slabs with lower rates but fewer deductions. Pensioners benefit from a higher standard deduction of ₹75,000, which can make the regime advantageous for those with limited investments or deductions. However, those who have significant investments under Sections 80C, 80D, or 80TTB may find the old regime more beneficial. Pensioners can compare both regimes directly on platforms like TaxBuddy, which automatically calculates tax under each to recommend the best option.
Q11. Do pensioners need to pay advance tax?
Pensioners who are senior citizens (aged 60 years or above) and have no income other than pension and interest are exempt from paying advance tax. However, if they have additional sources such as rental income or capital gains, advance tax may become applicable. For those who are below 60, advance tax rules apply if their total tax liability exceeds ₹10,000 after TDS. Pensioners can use the “e-Pay Tax” facility on the Income Tax portal or TaxBuddy to pay any outstanding amount online and avoid interest under Sections 234B and 234C.
Q12. How does TaxBuddy help pensioners in ITR filing?
TaxBuddy simplifies ITR filing for pensioners by combining automation with expert support. The platform extracts data directly from Form 16, AIS, and TDS records, ensuring accuracy while minimizing manual effort. It auto-identifies deductions under Sections 80C, 80D, and 80TTB and applies the correct standard deduction based on the chosen tax regime. Pensioners also receive expert review before submission to ensure compliance with the latest Budget 2025 updates. The system alerts users about mismatches, pending verifications, or missing details, making the process error-free. TaxBuddy’s mobile app further allows easy tracking, return filing, and verification from anywhere, ensuring a seamless experience.
Comments