Filing an income tax return (ITR) is an important annual exercise for taxpayers, and this obligation does not just end with retirement. Many pensioners continue to earn income through pensions, fixed deposits, savings accounts, and other investments even after they stop receiving a regular salary.
All of the income sources mentioned above are taxable. However, pensioners claim certain deductions under the income tax law that can help in lowering their tax bill. For Assessment Year 2026-27 (FY 2025-26), pensioners can choose between multiple ITR forms depending on their income profile.
Most deductions are available under old tax regime
Most tax deductions available to pensioners can be claimed only under the . Tax payers opting for the new tax regime are not eligible to claim deductions under Sections 80C, 80D, 80DDB and 80TTB. However, the standard deduction remains available under the new regime.
Additionally, resident individuals opting for the new tax regime may be eligible for a tax rebate under Section 87A if their taxable income falls within the prescribed threshold, reducing their tax liability further.
Key deductions pensioners should know
Pensioners can claim several deductions under the Income Tax Act, particularly if they opt for the old tax regime. These include:
Standard deduction
Pensioners can claim a standard deduction from their pension income:
- ₹50,000 under the old tax regime
- ₹75,000 under the new tax regime
Since pension is taxed under the head “Income from Salary”, pensioners are eligible for this deduction.
Section 80TTB
Senior citizens can claim deduction of up to ₹50,000 on interest earned from:
- Savings accounts
- Fixed deposits
- Post office deposits
- Deposits with co-operative banks
Section 80D
Deduction for health insurance premium:
- Up to ₹50,000 for senior citizens
Section 80DDB
Deduction on expenses incurred by an individual on himself or a dependent towards the treatment of specific diseases:
- Up to ₹1 lakh for senior citizens
Section 80C
Under the Income Tax Act 2025, has been restructured and combined under Section 123. It allows a maximum deduction of ₹1.5 lakh per financial year on eligible investments and expenditures, including:
- Life insurance premium
- Provident Fund
- National Savings Certificate (NSC)
- Housing loan principal repayment
Section 24(b)
Deduction on housing loan interest:
- Up to ₹2 lakh for self-occupied property under old tax regime
Relief from advance tax
As per Section 208, Income Tax Act,1961 every person whose estimated tax liability for the year is ₹ 10,000 or more, shall pay advance tax.
But, Section 207, Income Tax Act,1961 gives relief from payment of advance tax to a resident senior citizen. Thus, such taxpayers not having any Income from business or profession, is not liable to pay advance tax.
Some other benefits include individuals aged 80 years or above can continue filing ITR-1 and ITR-4 through the paper mode if they are not comfortable with filing their tax returns online. In addition to that, banks have a higher threshold before deducting TDS on interest income of.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.