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 old tax regime. 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.

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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 accountsFixed depositsPost office depositsDeposits with co-operative banksSection 80D

Deduction for health insurance premium:

Up to ₹50,000 for senior citizensSection 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 citizensSection 80C

Under the Income Tax Act 2025, Section 80C 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 premiumProvident FundNational Savings Certificate (NSC)Housing loan principal repaymentSection 24(b)

Deduction on housing loan interest:

Up to ₹2 lakh for self-occupied property under old tax regimeRelief 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.

Also Read | Income-tax: Filing ITR-4 form? Here’s what proof you need to claim deductions

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 senior citizens.

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