Reporting A Pension Income In The IT Form

[Dinesh Kumar]

Income tax is applicable for people who make their ends meet through their pension. A pension is a regular payment made by the state to people of or above the official retirement age and to some widows and disabled people. Also, if a salaried individual is retired from employment, typically because of age or ill health, then a pension is paid to them.

Income Tax Form for Pensioners

The Government of India has notified four Income Tax returns forms which are applicable to Hindu Undivided Family (HUF) and individual.

• Form No. ITR 1: Also popularly known as Sahaj (easy), this form can only be filed by an individual assesse. It is vital to take note that this form can only be used by an individual who has salary as his/ her source of income and not any business enterprise owned by him/her.

• Form no. ITR 1 is a means by which pensioners can file their income tax returns. This form is also used by majority of salaried taxpayers who own a single house and have their income which is taxable (i.e. income from other sources) in addition to their pension.

For Individuals Who Are Receiving Pension: 

Where the individual receives pension income from the fund to which contributions are made by employer, in case of ITR 2, under the salary schedule, the individual has to report the name, address and tax deduction and collection account number (TAN) (mandatory only if tax is withheld on pension) of the employer/LIC/any other fund. Also, the individual will have to select 'pensioners' as a category in the field for nature of employment in the salary schedule. 

Commuted pension beyond the limits exempt under the Act and the entire uncommuted pension, should be reported as "Commuted pension" or "Annuity or pension" under 'salary under section 17(1)' of the Act as taxable. The commuted pension which is exempt from tax should be entered in the field "Commuted value of pension received under section 10(10AA)" selected from the dropdown available under "Allowances to the extent exempt under section 10". The reporting of commuted and uncommuted pension in ITR 1 remains the same as ITR 2 except, while reporting the pension income, there is no requirement for the individual to enter name, address of the employer, also this income is to be directly reported under section 17(1) without selecting "Commuted pension" or "Annuity or pension" as applicable under ITR 2. 

Where the individual receives the pension from LIC/any other approved fund out of the contributions made by the individual from his own funds, he/she needs to report uncommuted pension under section "Any other income" of the schedule "income from other sources". Commuted pension, if any, will have to reported under the schedule "Exempt income" as "any other" in ITR 1 and as "any other" under the point "Other exempt income" in ITR 2.

Family Members Who Are Earning Pension: 

Family members who are earning pension will have to report the same under 'Any other income earned' in the other sources schedule in ITR 2. 

For ITR 1, the individual will have to select 'Family pension' from the drop-down under Income from other sources.

Courtesy – economic times

Discussions to this article

[Ganeshan Kalyani]

Nice write-up Sir.