Pensioner is a retired individual who lives his life and takes care of his day to day expenses with the help of pension amount received by him. Pension is a periodic allowance given to an individual by the organization that he has worked for in the past, post retirement of his services from the organization. It is a kind of compensation offered to an employee by his former employer in lieu of services offered by him to the organization. Pension is based on a prior agreement of services between the employer and the employee and is not based on any agreement for service. Agreement of Service stands valid till the employee is working with the firm, whereas, an Agreement for Service ends only when the employee is dead.

According to Section 60 of the CPC and Section 11 of the Pension Act, ‘Pension is an allowance (periodical) or a stipend given for any past service rendered to an organization and/or special merits’.

The Pension amount so received by the pensioner from his former employer is taxable Income Tax.  Pensioners receiving their pension from any nationalized bank or disbursing and drawing officers get several deductions on their salaried income Under Section 89(1) of the Act.
Section 88 and Section 88B of the IT Act, also provides for tax rebate adjustments to be carried out by banks while Deduction of TDS from one’s pension.