Pension, which is usually received on a monthly basis, much like salary, is also treated as salary for income tax purpose. As such, pensioners have to file their income tax returns (ITRs) under the Income-tax Act, 1961, in much the same way salaried taxpayers would file theirs on salaried income.

However, when pension is taken in a lump sum, it is eligible for exemption.

Also Read: Section 80D: How Can Senior Citizens Claim Deduction On Medical Expenditure

Pensioners who are aged 75 years and above and have only one source of income, pension and interest on it, need not file their returns under the Act.

Under Section 194P of the Income-tax Act, 1961, pensioners need to declare that they have no other source of income except for pension on Form 12BBA, and inform the same to the bank to which their pension is credited. The bank will deduct tax at source (TDS), if applicable. So, there is no need for such pensioners to file an ITR separately.

However, pensioners who have some other source of income are required to file their ITR.

If their income is more than the basic exemption limit, but less than Rs 50 lakh, they need to file ITR-1. In case they have income from capital gain, or want to carry forward capital loss, they need to file ITR-2. Forms ITR-3 and/or ITR-4 is used when there is an income from business and/or profession.

Let us see how pensions are taxed and how a pensioner should file his/her ITR.

How Is Pension Taxed?

For a government employee, if the pension is commuted, which means if it is taken in a lump sum at the time of retirement, it is totally exempted from tax. The non-commuted pension remains taxable every year that the pensioner receives it.

For a private sector employee, a commuted pension is partially exempt. The tax exemption depends on whether the taxpayer receives any gratuity. In the event of receiving gratuity and commuting 100 per cent pension, one-third of the commuted pension is considered tax-exempt, and if no gratuity is received, half of the commuted pension is taken as tax-exempt.

So, whether it is a commuted or non-commuted pension, filing an ITR is necessary and also beneficial in many cases.

Also Read: ITR Filing: When It’s Mandatory, Not Just Important, To File An ITR

How To File ITR For Pensioners?

If one has income from pension, one house property, interest income, and so on, one has to file their return using ITR-1. Here is the process to file the return.

Step 1: Visit the official website for filing the income tax return, and log in with your Permanent Account Number (PAN) and password.

Step 2: Go to e-file/’File Income Tax Return’ Then select the ‘Assessment Year’ and ‘Online’ for mode of filing, and click on ‘Continue’.

Step 3: Select ITR-1, click on ‘Let’s Get Started’ to start filing the return

Step 4: Tick the relevant box on the ‘Please answer the following questions to proceed further’ page and click on ‘Continue’

Step 5: Your personal information page will open. Check the pre-filled information, modify if needed, and click on ‘Proceed’.

Step 6: Fill your total income, deductions, TDS, and verify the account details.

Step 7: After filling in all the details, the page will show your tax liability, if any. You can choose either the ‘Pay Now’, or ‘Pay Later’ option.

Step 8: If you select the ‘Pay Now’ option, a pop-up will open up. Select the payment option, click on ‘Continue’, and make the payment.

Step 9: Check your ITR again through the ‘Preview Return’ option at the bottom; check all the filled details, and click on ‘Proceed to Preview’.

Step 10: The next page will show the filled-up ITR-1 form. Verify all the details again, and click on ‘Proceed to Validation’. If there is any error, rectify the same and proceed again.

Step 11: The next page ‘Complete your Verification’ will open. Choose from the ‘e-Verify Now’ option, which is recommended, or ‘e-Verify Later’, or ‘Verify via ITR-V’. Click on ‘Continue’.

Your ITR is filed. An acknowledgement number along with the message, ‘You have successfully filed and verified your return’ will appear on the screen. You can download the receipt for future reference.