ITR form for retired employees: Which ITR form should I use for ₹1.2 crore in pension, gratuity?

Choosing the right Income Tax Return (ITR) form is very important for all taxpayers, including senior citizens and retired employees. Income up to ₹50 lakh can be reported with ITR-1 (Sahaj), which is the least complicated of all tax return forms.

However, it is often confusing for retirees to find out which form to use when their total income or retirement benefits are over ₹50 lakh. Recently, M Vinayagam, one of our readers, shared this confusion. He retired from the Tamil Nadu Government job in September 2024 with around ₹1.2 crore in retirement benefits. Now he wants to know which ITR form to use to correctly report this income. The following is what he shared with us:

For the Financial Year 2024–25 (Assessment Year 2025–26), the individual in question has retired from service with the Tamil Nadu State Government in September 2024. During the year, the individual received a total of ₹37,82,000, comprising salary up to the date of retirement and regular pension thereafter. Additionally, on account of retirement, the individual received retirement benefits aggregating to ₹83,00,000, which include Death-cum-Retirement Gratuity, Commuted Value of Pension, and Encashment of Earned Leave. The total receipts for the year thus amount to ₹1,20,82,000. There is no income from any other source.

Under the provisions of the Income-tax Act, 1961, retirement benefits received by a state government employee are fully exempt from tax. Accordingly, the gratuity is exempt under Section 10(10)(i), the commuted pension under Section 10(10A)(i), and the earned leave encashment under Section 10(10AA)(i). As a result, the entire amount of ₹83,00,000 received on retirement is exempt and is required to be disclosed under the 'Exempt Income' schedule in the return of income.

Given that the only taxable income is salary and pension amounting to ₹37,82,000, the appropriate form for filing the income tax return would be ITR-1. This form is prescribed for individuals who have income from salary, pension, and other sources, but do not have income under the head "Profits and Gains of Business or Profession".