1Is pension income taxable?
A regular pension is taxed as salary, but with the standard deduction (Rs 75,000 new regime, Rs 50,000 old). Commuted (lump-sum) pension can be partly exempt; the monthly pension is taxable.
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ArticleA regular pension is taxed much like a salary, but retirees have several benefits that keep the tax low if used. Here's how to save tax on pension income.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
Pension is taxed as salary with the standard deduction; seniors also get a higher exemption and 80TTB. Here's how to minimise tax on your pension.
A regular (uncommuted) pension is taxed under "salary", which means you get the standard deduction against it — Rs 75,000 in the new regime, Rs 50,000 in the old. So the first slice of your pension is effectively shielded by the standard deduction.
A commuted (lump-sum) pension enjoys exemption within limits, while the ongoing monthly pension is taxable. If you have the option to commute part of your pension, weigh the lump-sum exemption against the taxable monthly stream.
In the old regime, senior citizens get a basic exemption of Rs 3,00,000 (Rs 5,00,000 for super-seniors above 80), higher than the Rs 2,50,000 for others. This shelters more of your pension before any tax begins.
Retirees usually have deposit interest alongside pension, and 80TTB lets seniors deduct up to Rs 50,000 of savings and deposit interest. Combined with the pension standard deduction, this keeps the overall retiree tax low.
Compare the old regime (higher exemption, 80TTB, 80D, 80C) against the new (Rs 75,000 standard deduction, higher rebate). Also, a resident senior with no business income is exempt from advance tax — paying any due as self-assessment at filing.
A regular pension is taxed as salary, but with the standard deduction (Rs 75,000 new regime, Rs 50,000 old). Commuted (lump-sum) pension can be partly exempt; the monthly pension is taxable.
Use the higher senior exemption (Rs 3 lakh, or Rs 5 lakh above 80) in the old regime, the standard deduction on pension, and 80TTB (up to Rs 50,000) on interest income. Compare both regimes.
A resident senior citizen with no business income is exempt from advance tax and can pay any tax due as self-assessment at filing. Pension TDS may also be deducted by the payer.
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