Income Tax Bill 2025: Top 5 Key Changes Pensioners Should Know
The revised Income Tax Bill, 2025, passed by the Lok Sabha, introduces key tax benefits for pensioners, including UPS relief, full commuted pension exemption, and clarity on withdrawals.
Income Tax Bill 2025 offers major tax reliefs for pensioners, including new benefits under the Unified Pension Scheme.
The Lok Sabha has passed the revised Income Tax (No. 2) Bill, 2025, marking a significant step toward replacing the six-decade-old Income Tax Act, 1961. Introduced by Finance Minister Nirmala Sitharaman, the bill aims to modernise and streamline India’s tax system. It now awaits Rajya Sabha approval and Presidential assent before becoming law.
While the legislation covers a wide range of provisions, several key measures directly impact pensioners. Here are the top five takeaways:
1. Unified Pension Scheme (UPS) Benefits
Subscribers to the Unified Pension Scheme under the National Pension System (NPS) will be eligible for tax-free withdrawals of up to 60% of their pension corpus at retirement—whether due to superannuation, voluntary retirement, or certain early retirement cases.
This exemption applies only if conditions outlined in the government’s January 24, 2025 notification are met. Similar benefits are already available to NPS subscribers.
2. Retirement Benefit Account Tax Relief
Income from “retirement benefit accounts” maintained in a notified foreign country will now be exempt from tax in India. This move is aimed at easing the tax burden for retirees with overseas retirement savings.
3. Full Exemption on Commuted Pensions
The revised bill extends a complete tax deduction for commuted pensions to all individuals investing in approved pension schemes. Previously, this full exemption was available only to salaried employees.
4. Clarity on Pension Scheme Withdrawals
The new bill clearly defines the tax treatment of partial withdrawals from pension schemes before maturity, reducing ambiguity and potential disputes between taxpayers and authorities.
5. Family Pension Deduction Unchanged
The existing deduction for family pensions remains the same—either one-third of the pension amount or ₹15,000, whichever is lower, can be claimed as a deduction.
Disclaimer: This article is for informational purposes only and should not be considered legal or tax advice. Pensioners are advised to consult a qualified tax professional or visit the Income Tax Department’s official website for the latest and most accurate guidance.
