Senior citizen tax

Senior citizen tax is the income-tax treatment of a resident individual aged 60 or more at any time during the tax year, a status Section 2(100) of the Income-tax Act 2025 defines and that carries a higher old-regime exemption, larger deductions for deposit interest and medical costs, a higher threshold for tax deducted from interest, no advance tax, and, from 75, relief from filing a return.

For the tax year 2026-27, which runs from 1 April 2026 to 31 March 2027, the governing statute is the Income-tax Act 2025, which repealed the Income-tax Act 1961 under its Section 536(1) with effect from 1 April 2026. The rates come from Section 3(1) of the Finance Act 2026 and its First Schedule. Each age-linked provision of the 1961 Act carried across with new numbers: Section 80TTB is now Section 153, Section 80D is Section 126, Section 80DDB is Section 128, and Section 194P is split across Sections 402(39), 393(1) and 263(8)(b). Forms 15G and 15H have merged into Form No. 121.

Almost every age benefit sits in the old tax regime. The new tax regime in Section 202(1) charges an 85-year-old and a 25-year-old on the same seven slabs and removes Sections 126, 128 and 153 from the computation. What survives the choice of regime is procedural: the Rs. 1,00,000 interest threshold, the Form No. 121 declaration, the advance-tax exemption at 60 and the return exemption at 75.

For a retired central government employee, a pension of up to Rs. 12,75,000 a year pays no tax in the new regime, against about Rs. 5,50,000 in the old regime at any age. The age uplift in the old regime is worth Rs. 2,500 a year to a senior citizen and Rs. 12,500 a year to a super-senior citizen once total income passes Rs. 5,00,000, and the deductions add more. The sections below give each provision, the rate tables, three worked computations and the deduction total at which the old regime overtakes the new one. The pension-specific rules, such as commutation and family pension, are covered in income tax for pensioners.

Who counts as a senior citizen

A senior citizen, for every provision of the Income-tax Act 2025 that uses the term, is an individual resident in India who is of the age of 60 years or more at any time during the relevant tax year. That is the whole of Section 2(100). Three conditions follow from its wording.

Age is tested at any time during the year, not on 1 April. A person born on 15 March 1967 turns 60 on 15 March 2027, inside the tax year 2026-27, and is a senior citizen for the entire year. The same person was not one for 2025-26, which ended on 31 March 2026 while they were still 59. At the boundary, the Supreme Court held in Prabhu Dayal Sesma v. State of Rajasthan, (1986) 4 SCC 59, that in the absence of an express provision a person “attains the specified age on the day preceding, the anniversary of his birth day”. Section 2(100) has no contrary rule, so on that reasoning a person born on 1 April 1967 is 60 on 31 March 2027 and a senior citizen for 2026-27.

Residence is required. A non-resident Indian aged 72 is not a senior citizen under Section 2(100). Such a person is taxed on the below-60 old-regime table or the new regime, gets no Section 153(2)(b) interest deduction, and has no advance-tax exemption. Residence for an individual is tested under Section 6 of the Act on days of stay, so a pensioner who spends most of a year abroad with children can lose the status for that year.

The definition belongs to the individual, not the household. A Hindu Undivided Family is never a senior citizen. Where a provision turns on the age of someone other than the taxpayer, it says so: Section 126(8)(a) looks at the age of the insured person and Section 128(4) at the age of the person treated, and a son aged 45 who pays for a 75-year-old father’s treatment claims the Rs. 1,00,000 limit under Section 128 where the father is a dependant as defined in Section 127(9).

Two further age lines appear outside Section 2(100):

Age lines in the Income-tax Act 2025, the Finance Act 2026 and the Income-tax Rules 2026 for the tax year 2026-27.

“Super-senior citizen” is not a defined term in the Act. It is the shorthand for item (III) of Paragraph A, and the Finance Act describes it as every individual, being a resident in India, who is of the age of 80 years or more at any time during the tax year. The super-senior citizen taxation article covers that table, the paper return and the old-regime break-even at 80.

Which statute applies to which year

The Income-tax Act 2025 received assent on 21 August 2025 and came into force on 1 April 2026. Section 536(1) repealed the Income-tax Act 1961 from that date, and Section 536(2)(c) keeps the repealed Act applying to proceedings for tax years beginning before 1 April 2026. A senior citizen filing in July 2026 for the year ended 31 March 2026 therefore files under the 1961 Act and its numbering. The return filed in 2027 for the year 2026-27 is the first under the 2025 Act.

The Finance Act 2026 (No. 4 of 2026, assented on 30 March 2026) has two charging sections for that reason. Section 2 charges the assessment year 2026-27 under the 1961 Act at Part I-A rates; Section 3 charges the tax year 2026-27 under the 2025 Act at Part I-B rates. The age-based slabs are the same in both Parts.

Every senior-citizen rule moved:

Section numbers for senior-citizen provisions under the repealed Income-tax Act 1961 and the Income-tax Act 2025.

The substance did not change in the move. The Rs. 50,000 interest ceiling, the Rs. 50,000 health-insurance ceiling, the Rs. 1,00,000 specified-disease ceiling and the 75-year return rule all carried across at the same figures. Any guide for 2026-27 that cites Section 80TTB or Section 194P is citing a repealed provision, as the Income-tax Act 2025 article explains for the statute as a whole.

Slab rates by age for the tax year 2026-27

The old regime has three slab tables split by age and the new regime has one. The old-regime tables are in Paragraph A of Part I-B of the First Schedule to the Finance Act 2026; the new-regime table is in Section 202(1) of the Income-tax Act 2025 itself.

Marginal rates by age, Paragraph A(I), (II) and (III), Part I-B, First Schedule, Finance Act 2026, and the Table to Section 202(1), Income-tax Act 2025, for the tax year 2026-27, before rebate, surcharge and cess.

Item (III) differs from item (II) in shape as well as in its first row. The super-senior table has no 5% band: income passes from nil straight to 20% at Rs. 5,00,000. The 80-year-old pays nothing on the first Rs. 5,00,000 but pays 20% on the next rupee, where a 65-year-old pays 20% only from the same point after Rs. 10,000 of 5% tax below it.

The cumulative tax at each break point shows what the age uplift is worth in rupees:

Slab tax in rupees before the Section 156 rebate and the 4% cess, computed by salary-calculator.in from the Finance Act 2026 and Section 202(1) tables.

Above Rs. 5,00,000 of total income the gap between the age columns is fixed: Rs. 2,500 for a senior citizen and Rs. 12,500 for a super-senior citizen, against a person below 60. That is the entire value of the age-based slab, and it is available only in the old regime. From Rs. 7,00,000 upward the new-regime column is lower than every old-regime column in the same rows; at Rs. 5,00,000 the super-senior column is the lowest. Above Rs. 5,00,000, then, the deductions decide whether the old regime is worth choosing.

The rebate and the income at which tax starts

Section 156 of the Income-tax Act 2025, the successor to Section 87A, moves the zero-tax line well above the first slab. Section 156(1) allows a resident individual in the old regime 100% of the tax or Rs. 12,500, whichever is less, where total income does not exceed Rs. 5,00,000. Section 156(2)(a) allows 100% of the tax or Rs. 60,000 where income chargeable under Section 202(1) does not exceed Rs. 12,00,000, and Section 156(2)(b) gives marginal relief up to a total income of Rs. 12,70,588.

The old-regime rebate erases the age difference at the bottom. At Rs. 5,00,000 of total income, the below-60 tax of Rs. 12,500 and the senior-citizen tax of Rs. 10,000 both fall within the Rs. 12,500 rebate, and the super-senior tax is already nil. All three ages pay nothing up to Rs. 5,00,000, so the higher nil slabs for older taxpayers change nothing below that figure.

Section 156(1) has no marginal relief. A senior citizen in the old regime with a total income of Rs. 5,10,000 pays Rs. 12,000 of slab tax plus cess, with no taper. After the Rs. 50,000 standard deduction on pension, that makes the old-regime zero-tax pension about Rs. 5,50,000 at every age, against Rs. 12,75,000 in the new regime after its Rs. 75,000 standard deduction. The gap of Rs. 7,25,000 of pension is the main reason most retired government employees end up in the new regime.

Surcharge and the 4% health and education cess apply without regard to age. Section 3(15) of the Finance Act 2026 charges the cess on tax plus surcharge, with no exemption for any assessee.

Deductions that depend on age

Three deductions in Chapter VIII of the Income-tax Act 2025 carry a higher limit for a senior citizen. All three are removed from the new-regime computation by Section 202(2)(a)(xii), which strikes out the whole of Chapter VIII except Sections 124(1), 124(2), 125(2) and 146. A senior citizen claims them only after opting out under Section 202(4).

Age-linked deductions under Chapter VIII, Income-tax Act 2025, tax year 2026-27, old regime only.

Interest on deposits, Section 153

Section 153(1)(b) gives an individual who is a senior citizen a deduction for interest on deposits with a banking company, a co-operative society carrying on the business of banking, or a Post Office as defined in the Post Office Act 2023. Section 153(2)(b) sets the amount as the whole of the interest up to Rs. 50,000 on deposits in any account, including time deposits. Section 153(5) defines time deposits as deposits repayable on the expiry of fixed periods, so fixed deposits, recurring deposits and Senior Citizens’ Savings Scheme interest all count.

The structure is a choice between two limbs. Section 153(1)(a) is for an individual who is not a senior citizen and Section 153(2)(a) limits that person to Rs. 10,000 of savings-account interest only, excluding time deposits. A senior citizen falls under (1)(b) and cannot also claim (1)(a), so the most a senior citizen gets under Section 153 is Rs. 50,000, not Rs. 60,000.

Interest on bonds, debentures, company deposits and non-bank deposits is outside Section 153 entirely, because Section 153(1) names only banks, co-operative banks and the Post Office. Section 153(4) also denies the deduction where the deposit is held by or on behalf of a firm, an association of persons or a body of individuals.

The Finance Act 2026 did not amend the Rs. 50,000 figure. The Rs. 1,00,000 figure that circulates alongside it is the threshold for tax deducted at source on a senior citizen’s interest, a rule about collection that is covered below.

Health insurance and medical expenditure, Section 126

Section 126 of the Income-tax Act 2025 is the successor to Section 80D, and its senior-citizen limbs are drafted as substitutions. Section 126(2)(a) allows health insurance for the taxpayer, spouse and dependent children, including contributions to the Central Government Health Scheme, up to Rs. 25,000; Section 126(2)(b) allows a further Rs. 25,000 for parents. Section 126(8)(a) substitutes Rs. 50,000 for Rs. 25,000 where the insured person is a senior citizen.

Section 126(2)(c) and (d) allow medical expenditure up to Rs. 50,000 for the self-and-family group and for parents. Section 126(7) allows such expenditure on a senior citizen “if no amount has been paid to effect or to keep in force the health insurance of such person”. Section 80D of the repealed Income-tax Act 1961 confined the expenditure limb to senior citizens; the words of Section 126(2)(c) and (d) set no age condition, and Section 126(7) is drafted as a condition on senior citizens, not as a restriction to them. Section 126(4) then caps each group at Rs. 50,000 in aggregate, so insurance and uninsured expenditure on the same group cannot be stacked past that figure.

Section 126(3) holds preventive health check-ups to Rs. 5,000 within the group limit, and Section 126(9) allows that one item in cash. Every other payment must be made by a mode other than cash. A retired couple aged 66 and 63 paying Rs. 48,000 a year for a family floater policy claims Rs. 48,000. A different taxpayer, aged 40, who pays Rs. 20,000 for a policy covering spouse and children and Rs. 55,000 for a 70-year-old parent’s policy claims Rs. 20,000 for that taxpayer’s own group and Rs. 50,000 for the parents’ group, Rs. 70,000 in all. The Section 80D article works through the remaining combinations.

Specified diseases, Section 128

Section 128(1) of the Income-tax Act 2025 allows a resident the amount actually paid for the treatment of a prescribed disease or ailment, for the taxpayer or a dependant, or Rs. 40,000, whichever is less. Section 128(4) substitutes Rs. 1,00,000 for Rs. 40,000 where the person treated is a senior citizen. This is the former Section 80DDB, covered with the rule 62 disease list in Section 80DDB.

Two conditions bind it. Section 128(2) requires a prescription from a neurologist, oncologist, urologist, haematologist, immunologist or other prescribed specialist. Section 128(3) reduces the deduction by any amount received from an insurer or reimbursed by an employer. A central government pensioner whose cancer treatment of Rs. 3,20,000 is reimbursed in full under the Central Government Health Scheme claims nothing under Section 128. One who spends Rs. 1,40,000 of their own money on treatment outside the scheme’s reimbursement claims Rs. 1,00,000.

The new regime for a senior citizen

The new regime in Section 202 of the Income-tax Act 2025 applies by default, and it treats age as irrelevant. The Table to Section 202(1) has one set of slabs, nil to Rs. 4,00,000 and up to 30% above Rs. 24,00,000, for every individual. No Paragraph A(II) or A(III) equivalent exists.

What a senior citizen keeps in the new regime is set out in Section 202(2) by exclusion. The deductions that survive are:

• the standard deduction of Rs. 75,000 on pension or salary at Section 19(1) Table serial 2, because Section 202(2)(a)(iv) removes only serial 1;
• the family pension deduction under Section 93(1)(d), one-third or Rs. 25,000, whichever is less, in place of Rs. 15,000 in the old regime;
• every retirement-receipt entry in the Section 19(1) Table, including the full exemption of government gratuity (serial 3), commuted pension (serial 7) and leave encashment (serial 13);
• every Schedule II and Schedule III exclusion that Section 202(2) does not name, including the reverse-mortgage loan at Schedule III serial 35;
• the employer’s contribution to the National Pension System under Section 124(1), which matters only to a re-employed pensioner.

What a senior citizen loses is the age-based slab, Section 153(2)(b), Section 126 and Section 128. The deductions allowed in the new tax regime article lists the full Section 202(2) exclusion set.

The trade is uneven at ordinary pension levels. A senior citizen in the new regime with a pension of Rs. 12,75,000 and no other income pays nil. The same person in the old regime, with Rs. 50,000 of standard deduction and the full Rs. 50,000 under each of Sections 126 and 153, has a total income of Rs. 11,25,000 and a slab tax of Rs. 1,47,500, before cess. Deductions worth Rs. 1,00,000 cannot compete with a rebate that cancels Rs. 60,000 of tax outright.

Old or new regime at 60 and above

The choice is made each year by a senior citizen without business or professional income. Section 202(4)(b) of the Income-tax Act 2025 lets such a person exercise the option to leave the default regime along with the return furnished under Section 263(1), so the regime can change from one tax year to the next. A senior citizen with business or professional income is under Section 202(4)(a): the option must be exercised by the due date, continues for later years, and can be withdrawn only once. The how to switch tax regime guide covers the mechanics.

Worked example: a pensioner aged 68

A retired Section Officer aged 68 draws pension and dearness relief of Rs. 65,000 a month, Rs. 7,80,000 for 2026-27. Fixed-deposit interest is Rs. 2,40,000 and a health-insurance premium of Rs. 40,000 is paid by bank transfer. Gross income is Rs. 10,20,000.

Tax year 2026-27, Section 202(1) and Paragraph A(II), Part I-B, First Schedule, Finance Act 2026.

The old regime costs this pensioner Rs. 89,440 a year. The Rs. 90,000 of age-linked deductions and the Rs. 2,500 slab uplift are worth far less than the Rs. 60,000 rebate ceiling in Section 156(2)(a).

Worked example: a super-senior pensioner aged 82

An 82-year-old retired officer draws pension, additional pension and dearness relief of Rs. 1,20,000 a month, Rs. 14,40,000 a year, and earns Rs. 3,00,000 of interest. During 2026-27 they pay a Rs. 50,000 health-insurance premium, spend Rs. 1,00,000 unreimbursed on the treatment of a prescribed ailment, and invest Rs. 1,50,000 in the Senior Citizens’ Savings Scheme. Gross income is Rs. 17,40,000.

Tax year 2026-27, Section 202(1) and Paragraph A(III), Part I-B, First Schedule, Finance Act 2026.

Rs. 4,00,000 of deductions and the largest age uplift in the Finance Act still leave the old regime Rs. 71,760 dearer. Above Rs. 5,00,000 the new regime’s slabs up to Rs. 24,00,000 charge less than the old regime’s at every age, and the deductions do not close that gap at this income.

The deductions at which the old regime wins

At higher incomes the comparison reduces to one number. Where new-regime total income exceeds Rs. 24,00,000 and old-regime total income exceeds Rs. 10,00,000, both regimes charge 30% at the margin, and the difference in tax depends only on the total of old-regime deductions. salary-calculator.in computes the break-even from the slab tables as follows, counting the Rs. 50,000 old-regime standard deduction inside the total:

Break-even total deductions in the 30% band, below the Rs. 50 lakh surcharge threshold, tax year 2026-27. Derived by salary-calculator.in: new-regime tax is Rs. 3,00,000 plus 30% above Rs. 24,00,000 on gross less Rs. 75,000; old-regime tax is the age-column figure at Rs. 10,00,000 plus 30% above it on gross less total deductions.

The age uplift lowers the required deductions by its own tax value divided by 30%: Rs. 2,500 / 0.3, about Rs. 8,333, for a senior citizen, and Rs. 12,500 / 0.3, about Rs. 41,667, for a super-senior citizen. The super-senior example above, with every age-linked deduction claimed in full plus the Rs. 1,50,000 Section 123 ceiling, reaches Rs. 4,00,000, less than half the figure. The remaining distance has to come from items such as home-loan interest under Section 22(1)(b). For incomes below the 30% band the break-even moves with income, and the tax regime break-even calculator guide and old vs new tax regime cover the full curve.

Tax deducted at source on interest and Form No. 121

A bank, co-operative bank or post office deducts tax from a senior citizen’s interest only above Rs. 1,00,000 a year. Section 393(1) Table serial 5(ii) of the Income-tax Act 2025 sets the threshold for interest other than interest on securities paid by a banking company, a co-operative society carrying on banking, or a post office on a deposit under a notified scheme at Rs. 1,00,000 for a senior citizen and Rs. 50,000 for anyone else. For other payers of interest, serial 5(iii) sets Rs. 10,000 regardless of age.

The threshold says nothing about whether the interest is taxable. A senior citizen in the new regime with Rs. 90,000 of fixed-deposit interest and a pension of Rs. 13,00,000 suffers no deduction on the interest but pays tax on all of it with the return, because the new regime allows no Section 153 deduction. Deposit interest is reported to the department through the annual information statement in Form No. 168 under rule 245 of the Income-tax Rules 2026, the successor to Form 26AS.

The Form No. 121 declaration

Section 393(6) of the Income-tax Act 2025 lets a resident individual give the payer a written declaration, in duplicate, that the tax on the estimated total income of the tax year will be nil. The payer then deducts nothing on the items listed in column C of the Table under Section 393(6), which include interest under serial 5(i), (ii) and (iii), rent under serial 2(ii) and income from units under serial 4(i). Rule 211(1) of the Income-tax Rules 2026 prescribes Form No. 121 for the declaration, replacing both Form 15G and Form 15H of the 1962 Rules. Rule 211(2) allows it to be furnished electronically or on paper.

The senior-citizen advantage is in the Note under the Table. The Note makes the declaration ineffective where the income covered exceeds the maximum amount not chargeable to tax, and then excludes a resident individual aged 60 or more at any time during the tax year from that bar. A person below 60 with Rs. 6,00,000 of interest cannot use Form No. 121 even if the rebate would wipe out the tax; a senior citizen in the same position can, because the test for a senior citizen is only whether the estimated tax is nil.

Take a widow aged 66 with a family pension of Rs. 3,00,000 and Rs. 6,00,000 of fixed-deposit interest. In the new regime, one-third of the family pension is Rs. 1,00,000, so the Section 93(1)(d) deduction is capped at Rs. 25,000 and total income is Rs. 8,75,000. The slab tax of Rs. 27,500 is cancelled by the Section 156(2)(a) rebate. Her estimated tax is nil, so she may give Form No. 121 to the bank even though her interest alone is half as much again as the Rs. 4,00,000 nil slab.

The declaration does not change the declarant’s own liability. Rule 211(3) requires the payer to allot a unique identification number to each Form No. 121 and rule 211(4) to report it in the quarterly TDS statement, and rule 211(5) lets an income-tax authority call for it for seven years. A senior citizen who gives Form No. 121 and then receives a capital gain that makes the year taxable pays the tax with the return. From 1 April 2027 a clause (b) inserted into Section 393(6) by the Finance Act 2026 lets the declaration also be furnished electronically to a depository for income from units, interest on securities and dividends, where the units or securities are held with that depository and are listed on a recognised stock exchange.

Specified senior citizens aged 75 and above

A pensioner aged 75 or more with nothing but pension and interest from the paying bank does not have to file a return. Three provisions do the work, replacing the single Section 194P of the 1961 Act.

Section 402(39) defines a specified senior citizen as an individual resident in India who is of the age of 75 years or more at any time during the tax year, who has pension income and no other income except interest received or receivable from any account maintained in the same specified bank in which the pension is received, and who has furnished a declaration to that bank in the prescribed form.

Section 393(1) Table serial 8(iii) puts the duty on the specified bank: it deducts tax on the total income of the specified senior citizen after giving effect to the deductions allowable under Chapter VIII and the rebate allowable under Section 156. Rule 208(1) of the Income-tax Rules 2026 prescribes the declaration as Form No. 125, replacing Form 12BBA. Rule 208(3) has the bank give effect to the Chapter VIII deductions on the evidence the pensioner furnishes during the year.

Section 263(8)(b) removes the duty to file under Section 263 for a tax year in which tax has been deducted under Section 393(1) Table serial 8(iii).

The relief is narrow, and three conditions are where pensioners fall out of it:

Conditions in Section 402(39), Income-tax Act 2025, and rule 208, Income-tax Rules 2026.

It is relief from filing, not from tax. The bank computes and deducts the full tax for the year, and a pensioner who wants to claim a refund of excess deduction, or who has any income outside the definition, files a return in the ordinary way.

Advance tax and self-assessment

A senior citizen with no business or professional income pays no advance tax. Section 403(3) of the Income-tax Act 2025 disapplies the advance-tax liability in Section 403(1) for an individual resident in India who does not have any income chargeable under the head Profits and gains of business or profession and who is of the age of 60 years or more at any time during the tax year.

Such a person pays any tax not covered by deduction at source as self-assessment tax under Section 266 before filing the return, and no interest for deferment of advance tax arises under Sections 424 and 425 because there was no advance-tax liability to defer. A retired officer who earns Rs. 8,00,000 of long-term capital gains on selling a flat in February 2027 can therefore pay the tax with the return in July 2027 without interest for the missed instalments, though interest under Section 423 still runs if the return itself is late.

The exemption ends with the first rupee of business or professional income. A retired engineer aged 63 who takes consulting assignments is liable to advance tax under Section 404 once the tax for the year, net of deduction at source, is Rs. 10,000 or more, with instalments under Section 408.

Filing the return

A senior citizen who is not a specified senior citizen files a return under Section 263(1) of the Income-tax Act 2025 when total income exceeds the maximum amount not chargeable to tax, and for the other reasons Section 263 lists. A pensioner with pension, interest and up to two house properties files ITR-1, the two-property limit coming from rule 164(2)(b) of the Income-tax Rules 2026.

Rule 164(12) of the Income-tax Rules 2026 sets the manner of filing in a Table. Serial 4 covers an individual of the age of 80 years or more at any time during the tax year who furnishes a return in Form No. SAHAJ (ITR-1) or Form No. SUGAM (ITR-4), and alone among individuals allows clause (d), paper form, alongside electronic filing. Every other individual whose accounts are not audited files under serial 3, electronically, with electronic verification or a signed ITR-V. The income tax e-filing step-by-step guide covers the electronic route.

The regime choice under Section 202(4)(b) is made in the return itself, so a senior citizen who wants the old-regime deductions claims them there. A return furnished after the due date carries the late fee in Section 428, the successor to Section 234F.

Pension, family pension and retirement receipts

A central government pension is salary for a senior citizen as for anyone else. Section 15(2) of the Income-tax Act 2025 treats a former employer as an employer and Section 16(b) brings any annuity or pension into salary, so the pension carries the Section 19(1) Table serial 2 standard deduction and is taxed at the age-appropriate rate. The pension-disbursing bank deducts tax under Section 392 and issues the certificate in Form No. 130 under rule 215 of the Income-tax Rules 2026, the successor to Form 16.

Four age-relevant points:

• Additional pension at 80 is pension. The 20% additional pension payable at 80 under Rule 44(6) of the CCS (Pension) Rules 2021 and the higher rates after 85 are taxed with the basic pension, and the additional pension for old age article sets out the scale.
• Dearness relief is part of the pension and taxed with it.
• Family pension is income from other sources, with the Section 93(1)(d) deduction of one-third or Rs. 25,000 in the new regime and one-third or Rs. 15,000 in the old.
• Commuted pension, gratuity and leave encashment received at retirement are fully excluded for a central government employee under serials 7, 3 and 13 of the Section 19(1) Table.

Income tax for pensioners covers each of these in full, together with arrears relief under Section 157 and the re-employed pensioner.

Senior Citizens’ Savings Scheme and tax

The Senior Citizens’ Savings Scheme, 2019, notified as G.S.R. 916(E) dated 12 December 2019 under the Government Savings Promotion Act 1873, is a deposit scheme run through post offices and authorised banks. Paragraph 3(1) opens it to a person who has attained 60 on the date of opening the account, to a retiree aged 55 to 59 who opens it within three months of receiving the retirement benefits, and, by its proviso, to a retired defence services member from 50, excluding civilian defence employees. G.S.R. 240(E) dated 31 March 2023 raised the maximum deposit from Rs. 15 lakh to Rs. 30 lakh. Paragraph 5(2) pays interest quarterly, on the first working day of April, July, October and January, and the Department of Economic Affairs OM F. No. 1/4/2019-NS dated 30 September 2026 left the small savings rates for 1 October to 31 December 2026 unchanged from the previous quarter. The tax treatment has two sides.

The deposit qualifies under Section 123 read with Schedule XV paragraph 1(u), within the Rs. 1,50,000 aggregate ceiling of Section 123. Paragraph 1(u) names a deposit in an account under the “Senior Citizen Savings Scheme Rules, 2004”, which G.S.R. 912(E) dated 12 December 2019 rescinded on the day the 2019 Scheme was notified, so an Act passed in August 2025 cites an instrument rescinded in December 2019. That is an old-regime deduction only; Section 202(2)(a)(xii) removes Section 123.

The interest is taxable as income from other sources in the year it accrues. It is interest on a time deposit with a Post Office or bank, so it falls within Section 153(2)(b) and shares the Rs. 50,000 ceiling with all other deposit interest. Tax is deducted only above the Rs. 1,00,000 senior-citizen threshold in Section 393(1) Table serial 5(ii) and Form No. 121 stops deduction where the estimated tax is nil.

The Senior Citizens’ Savings Scheme tax article covers deduction at source, premature closure and the five-year clawback in Schedule XV paragraph 5.

Reverse mortgage

A senior citizen who mortgages a house to a bank under a reverse mortgage pays no tax on either leg. Section 70(1)(zh) of the Income-tax Act 2025 provides that a transaction of reverse mortgage under a scheme notified by the Central Government is not a transfer of a capital asset, so no capital gain arises when the house is mortgaged. Serial 35 of the Table in Schedule III excludes from total income any amount received as a loan, in a lump sum or in instalments, in such a transaction, with “any individual” as the eligible person.

Both provisions survive the new regime, because Section 202(2) does not name either. The protection depends on the scheme being one the Central Government has notified; a private arrangement that is a reverse mortgage in substance but not under a notified scheme is outside Section 70(1)(zh).

Common misreadings

“Senior citizens get a Rs. 1 lakh deduction on interest.” The deduction is Rs. 50,000 under Section 153(2)(b), old regime only. Rs. 1,00,000 is the deduction-at-source threshold under Section 393(1) Table serial 5(ii).

“Pensioners over 75 are exempt from tax.” They are exempt from filing a return, and only as specified senior citizens under Section 402(39). The bank deducts the tax under Section 393(1) Table serial 8(iii).

“A super-senior citizen pays less in the new regime.” The new regime has no age column. An 80-year-old and a 30-year-old with the same income pay the same tax under Section 202(1).

“The old regime suits retirees because of the senior deductions.” At pension levels up to Rs. 12,75,000 the new regime is nil and the old regime is not. The two worked examples above, at Rs. 10,20,000 and Rs. 17,40,000 of gross income, both come out cheaper in the new regime.

“A non-resident pensioner aged 70 is a senior citizen.” Section 2(100) requires residence, so a non-resident is on the below-60 old-regime table or the new regime and has no Section 403(3) exemption.

“Forms 15G and 15H still apply.” For income from 1 April 2026 the form is Form No. 121 under rule 211 of the Income-tax Rules 2026, filed under Section 393(6).

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• Section 202 new regime
• Old vs new tax regime
• Tax regime break-even calculator guide
• How to switch tax regime
• Section 87A rebate
• Marginal relief on income tax
• Standard deduction
• Deductions allowed in the new tax regime
• Rebate, deduction and exemption
• Section 80C
• Section 80D
• Section 80TTB
• Section 80DDB
• Section 194P
• Super-senior citizen taxation
• Senior Citizens’ Savings Scheme tax
• Advance tax
• Surcharge on income tax
• Health and education cess
• Form 16
• Form 26AS
• ITR-1 Sahaj
• Income tax e-filing step by step
• Late filing fee
• Family pension
• Additional pension for old age
• Dearness relief
• Commutation of pension
• Gratuity for central government employees
• Section 89 relief
• Re-employed pensioner taxation
• PPO and life certificate
• Central Government Health Scheme
• Home loan interest, Section 24(b)
• Income tax for government employees
• Central Board of Direct Taxes

External references

• Income-tax Act 2025, Income Tax Department
• Income-tax e-filing portal
• The Gazette of India, Finance Act 2026 and Income-tax Rules 2026
• Central Board of Direct Taxes, Department of Revenue
• Department of Pension and Pensioners’ Welfare
• Pensioners’ Portal

References

1. Income-tax Act 2025 (No. 30 of 2025), Section 2(100) (senior citizen), Section 402(39) (specified senior citizen), Section 536(1) and 536(2)(c) (repeal and saving), in force 1 April 2026.
2. Finance Act 2026 (No. 4 of 2026), Section 3(1) and Paragraph A(I), (II) and (III) of Part I-B of the First Schedule (old-regime slabs by age), Section 3(15) (cess), assented 30 March 2026.
3. Income-tax Act 2025, Section 202(1), 202(2)(a) and 202(4) (new regime and option) and Section 156 (rebate).
4. Income-tax Act 2025, Sections 126, 128 and 153 (health insurance, specified diseases and deposit interest).
5. Income-tax Act 2025, Section 393(1) Table serials 5(ii), 5(iii) and 8(iii), and Section 393(6) with the Note to its Table (deduction at source and nil-tax declaration).
6. Income-tax Rules 2026, rule 208 and Form No. 125 (specified senior citizen), rule 211 and Form No. 121 (declaration under Section 393(6)), rule 164(2)(b) and 164(12) (return forms and manner of filing).
7. Income-tax Act 2025, Section 263(8)(b) (return exemption), Sections 403(3) and 404 (advance tax).
8. Income-tax Act 2025, Section 70(1)(zh) and Schedule III Table serial 35 (reverse mortgage), Section 123 with Schedule XV paragraph 1(u) (Senior Citizens’ Savings Scheme deposit).