The Central Board of Direct Taxes (CBDT) has announced an extension for filing Income Tax Returns (ITR) for the financial year 2024-25, moving the deadline from July 31, 2025, to September 15, 2025. Many taxpayers are seeking clarity on the tax implications of retirement benefits, including Provident Fund (PF), gratuity, and pensions, particularly for those approaching retirement.

Generally, the Provident Fund (PF) is not subject to tax if withdrawn after five years of continuous service. However, if the withdrawal occurs before this period, it may be taxed according to the individual's income bracket. Additionally, the interest accrued on PF is tax-exempt up to a specified limit, contingent on certain conditions.

The taxability of PF depends on various factors, including the length of service, employer type, and contribution amount. Government employees are exempt from taxes on PF withdrawals upon retirement, while non-government employees enjoy tax-free status only if they have remained with the same employer for at least five years without interruption.

According to the Income Tax Department, any interest income accrued from contributions exceeding Rs 2,50,000 in a financial year will not be exempt. If an employer does not contribute to the PF, any interest earned on the employee's own contributions exceeding Rs 5,00,000 in a year will be taxable.

Gratuity serves as a significant retirement benefit, with its tax treatment varying based on employment type. For government employees, gratuity is entirely exempt from income tax. In contrast, non-government employees can only claim tax exemption on gratuity up to certain limits defined by the Income Tax Act, with amounts exceeding these limits being taxable.

Pensions are generally classified as taxable income, although there are specific exemptions based on the type and conditions of the pension.

Uncommuted Pension (Monthly Pension): This is classified as salary income and is fully taxable according to applicable slab rates.

Commuted Pension (Lump Sum): Government employees are not taxed on the entire amount of gratuity.

For non-government employees: If they receive gratuity, one-third of their commuted pension is tax-exempt. If gratuity is not received, half of the commuted pension is tax-free.

Family Pension (To Legal Heirs): This pension is taxed as 'Income from Other Sources.' Taxpayers can reduce their taxable pension by Rs 15,000 or one-third of the pension amount, whichever is lower.

Standard Deduction for Pensioners: Under the old tax regime, pensioners receiving monthly pensions can claim a standard deduction of Rs 50,000.

With the ITR deadline now extended to September 15, 2025, taxpayers are encouraged to file their returns promptly to avoid last-minute complications and potential late fees. Government employees benefit from broader tax exemptions on retirement benefits compared to their private sector counterparts. It is crucial for private sector employees to be aware of exemption limits and their service duration to accurately assess their tax obligations. Staying updated on the latest tax regulations is vital for ensuring correct income tax return filings and avoiding penalties.