EPS-95 Pension and the ₹75,000 Standard Deduction- Recent changes in the income tax system have led to confusion among many retirees, especially those receiving pension under the Employees’ Pension Scheme, commonly known as EPS-95. A common question being raised is whether EPS pensioners can claim the enhanced ₹75,000 standard deduction available under the new tax regime. While many pensioners assumed that all types of pension income would qualify for this benefit, the actual tax position is more detailed and depends mainly on how the pension income is classified.
How EPS Pension Is Treated Under Tax Law
In India, pension income is not treated the same in every situation. Generally, a pension received directly from a former employer is treated as salary income. This allows the pensioner to claim benefits that are available to salaried individuals, including the standard deduction announced in recent Union Budgets. However, pensions received under statutory social security schemes are often treated differently. The Employees’ Pension Scheme is managed by the Employees’ Provident Fund Organisation. In many cases, the pension paid under EPS is classified as “income from other sources” instead of salary income. This difference in classification is very important because the ₹75,000 standard deduction under the new tax regime mainly applies to salary income and certain eligible family pensions. As a result, EPS pensioners may not automatically qualify for the higher standard deduction simply because they are receiving pension income.
Why Confusion Has Increased in 2026
The confusion has grown after the government expanded the standard deduction to ₹75,000 in order to make the new tax regime more attractive. Many retirees believed that this benefit would apply equally to all pensioners. However, tax experts have clarified that eligibility depends on the nature of the income head under which the pension is reported in the income tax return. Earlier, when the standard deduction was lower, the difference between the salary pension and the social security pension did not attract much attention. Now that the deduction amount has increased, the distinction has become more noticeable. Pensioners who shifted to the new tax regime expecting higher relief are now reassessing their tax calculations.
Impact on Private Sector Retirees
This issue mainly affects private sector retirees who depend on EPS benefits as a primary source of income. Government pensioners usually receive pensions treated as salary income, making them more likely to qualify for the standard deduction. In contrast, EPS beneficiaries often receive smaller monthly amounts that may fall under a different income category. For example, if a retiree receives ₹9,000 per month under EPS, the annual pension comes to ₹1,08,000. If the ₹75,000 standard deduction is not available due to classification under “income from other sources,” the taxable income could be higher than expected under the new regime. Therefore, pensioners should not assume that the enhanced deduction will automatically reduce their tax burden.
Comparing the Old and New Tax Regimes
Under the old tax regime, pensioners could claim several deductions, including investments under Section 80C, medical insurance premiums, and a standard deduction of ₹50,000. Although the new regime offers reduced tax slab rates and a higher standard deduction for eligible individuals, it removes many other exemptions and deductions. For some EPS pensioners, especially those who invest regularly or pay health insurance premiums, the old regime may still provide better overall tax savings. Others with fewer deductions and straightforward income may benefit from the lower slab rates under the new regime. The correct choice depends on individual income levels, expenses, and financial planning.
Steps Pensioners Should Take
EPS pensioners should carefully review their tax documents before filing returns. Checking Form 26AS, annual pension statements, and the income classification used in the return is very important. Since the eligibility for the ₹75,000 deduction depends on how the income is categorized, verifying these details can prevent errors. It is also advisable to compare tax liability under both the old and new regimes using official tax calculators or with the help of a qualified tax professional. As tax rules can change through future budget announcements or government notifications, staying updated is equally important.
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Disclaimer- This article is for general informational purposes only. Tax laws and interpretations may change based on government notifications and individual circumstances. Readers are advised to verify details through official sources or consult a qualified tax professional before making any tax or financial decisions.
