Should Govt Employees Include Retirement Benefits in Their Tax Returns?

Ans: Hello, the taxability is for 12months i.e from 1st April to 31st March. Anything apart from this can be an adjustment for past or future salaries

Ans: Senior citizen earning interest income from FDs/Dividend Income of Rs.6 lacs and eligible for deduction of Rs.1 lac on mediclaim; is not likely to pay any tax as income upto 5 lacs is eligible for rebate upto 10,000.

You can cross check https://incometaxindia.gov.in/Pages/tools/income-tax-calculator-234ABC.aspx

Ans: Amount received by government employees from said funds are exempt from tax on retirement on fulfillment of certain conditions like category of PF fund, upper limit on contribution of employer, commuted pension etc

Ans: You need to declare all the income, but some are taxable and some are not
1) Pension received is taxable
2) PF received is not taxable if service is more than 5yrs
3) Gratuity is exempt up to 20L
4) For government employees - commutation is not taxable
5) For government employees leave encashment on retirement is not taxable

Ans: You’re 65, have no pension, and earn around Rs 4.5 lakh annually through bank interest and annuities. You have filed ITR until last year. Now you're asking if filing returns is mandatory given the new Budget provision making income up to Rs 12 lakh tax-free under the new regime.

Let’s assess your situation thoroughly.

? Age and applicable exemption limit
– You are a senior citizen (age 60–79).
– Under the old tax regime, income up to Rs 3 lakh is exempt.
– Under the new tax regime, the basic exemption limit is Rs 4 lakh for all individuals.

? New tax exemption and rebate rules
– The Budget 2025 provides rebate under Section 87A for income up to Rs 12 lakh.
– This rebate makes your final tax liability zero.
– But to claim this rebate, you must file your income tax return.

? When return filing is mandatory
Even if income is below taxable limits, return filing is compulsory in these cases:

You want to claim a refund or rebate.

You have any capital gains during the year.

You deposited more than Rs 50 lakh in a year.

Your electricity bill is above Rs 1 lakh annually.

You hold any foreign asset or earn foreign income.

You want to carry forward previous losses.

In your case, since rebate brings tax to zero, return filing is required to claim this benefit.

? Are you eligible for auto?exemption from filing?
– Section 194P gives exemption to super senior citizens above 75 years.
– It applies only when income is from pension and interest from the same bank.
– You are 65, so this clause does not apply.

? Summary of your situation

– Your total income is Rs 4.5 lakh.
– Your final tax liability is zero under the new regime.
– But return filing is still mandatory to claim the rebate.
– You do not qualify for automatic filing exemption.

? Filing process and compliance

– Use ITR-1 if your income is only from pension and interest.
– If you have capital gains or more complex income, use ITR-2.
– Declare total income, then claim deduction under Section 87A.
– File by the due date, which is 15 September 2025.
– After this, you’ll receive an acknowledgment from the Income Tax Department.

? What happens if you don’t file?

– Even with no tax due, not filing may lead to compliance issues.
– You may get notices or lose refund/rebate benefits.
– It’s always safer to file the return properly and on time.
– It protects you from future tax complications.

? Final insights

– You have managed your post-retirement income quite well.
– Though income is below the Rs 12 lakh rebate level, ITR filing is essential.
– This helps claim rebate and remain compliant.
– Since you’re under 75, you cannot rely on automatic filing exemption.
– Filing now gives peace of mind and prevents future issues.
– Make sure to file ITR using the right form before the deadline.

Wishing you continued financial clarity and comfort in your golden years.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment