Retired employees receiving a pension must file their Income Tax Returns (ITR) since the pension is considered income from salary and taxed by the Income Tax Department. Senior citizens are classified for tax purposes as individuals who are above 60 years but less than 80 years of age. Individuals who are above 80 years of age are considered as super senior citizens for tax classification purposes.Senior citizens earning up to Rs. 3 lakh per year are exempt from paying income tax under the previous taxation system, whereas those under the new regime are exempt if their annual income is less than Rs. 2.5 lakh.
Here are all the necessary details required to accurately report pension income in your tax returns:
Pensions are taxed differently depending on their type. In case of family pensions received by the legal heirs of a deceased individual, it falls under the "Income from other sources" section of the ITR. On the other hand, pensions from the state or federal government are fully taxable under "salary." In the case of pensions received from private enterprises, it is categorized as "income from salary" in the ITR.
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For online tax return filing, access the incometax.gov.in website and select the relevant Form 16 or 16A. Once logged in to the ITR portal, calculate your tax liability based on your pension and other sources of income. Use Form 26AS to reconcile your tax deductions with the net tax payable, and provide the necessary information on the ITR form. Ensure to file your tax returns by the due date.
Section 80C, 80CCC, and 80CCD provide tax benefits to pensioners on payments made towards provident funds, life insurance premiums, national savings certificates, pension schemes of the central government, and annuity plans of Life Insurance Corporation of India or other insurers for pension schemes under the previous taxation system. These deductions have a combined limit of Rs. 1,50,000 and cannot be availed of if the pensioner falls under the new tax regime.
Under both the old and new tax regimes, tax deductions can be claimed by employees under Section 80CCD(2) for contributions made by their employer to the Centre's pension scheme. For public sector units, state governments, and other units specified under the section, the deduction limit is 10% of the employee's salary. In the case of the central government, the deduction limit is 14% of the employee's salary.
