Can I claim ₹75,000 standard deduction on LIC annuity, EPS and NPS in ITR for AY 2026-27?

Pensioners receiving benefits under the Employees' Pension Scheme (EPS), a pension from a former employer or a corporate National Pension System (NPS) may claim the standard deduction when filing their income tax returns (ITR) for FY 2025-26 (AY 2026-27).

However, annuity income from an individual NPS account or an annuity purchased with LIC policy proceeds are not eligible for the tax benefit.

How much standard deduction is allowed?

Employees can claim a maximum deduction of ₹50,000 or their salary, whichever is lower, if they have opted for the old tax regime.

Who can claim the standard deduction?

Since these pensions are taxed as salary, eligible pensioners can claim the standard deduction.

When is the deduction not available?

Jain clarified that the standard deduction cannot be claimed on annuity income received from:

• an individual NPS account; and

• an annuity purchased using the proceeds of an LIC policy.

The standard deduction against salary income does not apply to such annuity income because it is typically taxed under the head 'Income from Other Sources'.

There is an exception if the employer bought the annuity on behalf of the employee. In such cases, the pension received from that annuity is eligible for the standard deduction since it is treated as salary income.

"A standard deduction of up to ₹75,000 under the new tax regime and up to ₹50,000 under the old tax regime is available to pensioners on pension received from the EPFO, a former employer and corporate NPS. However, it is not available on annuity income from an individual NPS account or an annuity purchased by the individual. The deduction is available on pension received from an annuity purchased by the employer," said Balwant Jain.

Standard deduction: Who is eligible?

Now, let's try to understand this with simple examples

**EPS pension **

**Individual NPS annuity **

Radha invested in the NPS after retirement and receives an annual annuity of ₹4 lakh from the amount used to buy the annuity. Although the annuity is taxable, she cannot claim the standard deduction because an annuity purchased from an individual NPS account is generally not treated as salary income.

**LIC annuity **

Neeraj purchased an annuity using the maturity proceeds of his LIC policy and receives ₹3 lakh a year as annuity income. He cannot claim the standard deduction because the annuity is not taxed as salary.

**Employer-purchased annuity **

Jaya's employer purchased an annuity on her behalf as part of her retirement benefits. She receives ₹7 lakh a year as pension from this annuity.

Since the annuity was purchased by the employer and the pension is treated as salary income, Jaya can claim the standard deduction under the applicable tax regime.

Eligibility for the standard deduction depends on how the pension or annuity is taxed, specifically, whether it is treated as salary income. The source of the pension or annuity alone does not determine the deduction. This helps pensioners understand when they can claim the standard deduction while filing their income tax returns.