The saying “Death and taxes are the only two certainties in life” is a famous quote attributed to Benjamin Franklin, one of the founding fathers of the United States. Hence, it is inevitable that while it is necessary for veterans to do financial planning during their post retirement year, they also have to pay taxes and ensure that they file their annual returns correctly, so that their financial affairs are kept in order and they don’t get to receive notices from the Income Tax Department.

Overview of Taxation in India

India’s tax system is broadly categorized into direct taxes (levied on income or wealth) and indirect taxes (levied on goods and services). The structure is administered by the Central Board of Direct Taxes (CBDT) for direct taxes and the Central Board of Indirect Taxes and Customs (CBIC) for indirect taxes, under the Ministry of Finance.

Direct Taxes are imposed on individuals, Hindu Undivided Families (HUFs), companies, and other entities based on their income or wealth. The primary direct tax is Income Tax which is governed by: Income Tax Act, 1961. Income includes salaries, business profits, capital gains, house property income, and other sources. Individuals are required to pay income tax as per the Tax Slabs under which their taxable income falls. For FY 2024-25, these tax slabs are as follows (as per the New Tax Regime, which is default unless opted out):-

• ₹0–₹3 lakh: Nil
• ₹3 lakh–₹7 lakh: 5% (rebate under Section 87A makes tax nil up to ₹7 lakh)
• ₹7 lakh–₹10 lakh: 10%
• ₹10 lakh–₹12 lakh: 15%
• ₹12 lakh–₹15 lakh: 20%
• Above ₹15 lakh: 30%

There is also a surcharge – essentially an additional tax on high earners – which amounts to 10% for those earning income from ₹50 lakh–₹1 crore, up to 37% for income above ₹5 crore in the new regime) as well as a cess which is 4% Health and Education Cess on tax liability.

The Old Tax Regime, which taxpayers can also opt for, offers more deductions (e.g., under Sections 80C, 80D) but higher tax rates for similar income brackets. Taxpayers can choose between the Old and New Tax Regime annually, prior to filing their returns through the SPARSH Pension Portal.

Indirect Taxes are levied on the consumption of goods and services, collected by businesses and passed to the government. The primary indirect tax is GST which has four slabs: 5%, 12%, 18%, and 28%. Essential goods (e.g., food grains) are exempt or at 0%, while luxury goods and sin goods (e.g., tobacco) attract higher rates or cess. Other Indirect Taxes include Excise Duty on petroleum products, Stamp Duty and Property Taxes.

Tax Exemptions for Armed Forces

Lump sum benefits like retirement gratuity (exempt up to ₹20 lakh under Section 10(10)), leave encashment (fully exempt for government employees, including naval veterans, under Section 10(10AA)), and commuted pension (exempt under Section 10(10A)) are tax-free.

Allowances like gallantry awards, disability pensions, and certain service-related benefits for armed forces personnel are also exempt.

Tax Deducted at Source (TDS)

TDS is a mechanism under the Indian Income Tax Act, 1961, where a certain percentage of tax is deducted by the taxpayer (deductor) from payments made to the recipient (deductee) at the time of payment, and this tax is remitted to the Government of India on behalf of the recipient. TDS applies to salaries, Savings Accounts and Fixed Deposits, interest, purchase of property and certain other payments.

Tax Collected at Source (TCS)

TCS is a tax collected by a seller (or collector) from a buyer at the time of sale of specified goods (such as a vehicle) or services, as mandated under the Income Tax Act, 1961. The collected tax is then deposited with the Govt, and the buyer can claim credit for it while filing their Income Tax Return (ITR).

TCS is also applicable on foreign remittances – such as funding children’s schooling abroad, or investing in foreign stocks – as per Section 206C(1G) of the IT Act, 1961, introduced effective from October 1, 2020. It applies to remittances made under the Liberalised Remittance Scheme (LRS) of the RBI and for overseas tour packages. TCS is collected on remittances exceeding ₹7 lakh in a financial year under LRS, which allows resident individuals to remit up to $250,000 per year for permissible purposes (e.g., education, travel, investment, medical treatment, gifts, or maintenance of relatives). TCS also applies to payments for overseas tour packages, regardless of the amount (no ₹7 lakh threshold).

Advance Tax

Advance Tax is payable by individuals with tax liability exceeding ₹10,000 annually, in installments (15% by 15 June, 45% by 15 September, 75% by 15 December, 100% by 15 March). However, senior citizens are exempt from paying Advance Tax.

Tax Exemptions Applicable to Indian Navy Veterans

• Retirement Gratuity: Exempt up to ₹20 lakh (Section 10(10)). A ₹1,20,000 deduction for ECHS membership is mandatory but not a tax.
• Naval Group Insurance Fund (NGIF) Survival Benefits: Generally tax-exempt as insurance payouts, including PRDIES benefits (₹60 lakh term insurance cover as of 2024).
• Commuted Pension: Tax-free under Section 10(10A). The remaining pension is taxable under the “Salaries” head of income.
• Leave Encashment: Fully exempt for government employees, including naval veterans, under Section 10(10AA).
• Disability Pension: Exempt for armed forces personnel under Section 10(10D) for service-related disabilities.

It is to be noted that while the above are fully exempt from tax, they are nevertheless to be reflected as Exempt Income in the Income Tax return for the Financial Year in which they were received i.e. the year of retirement of the veteran.

Income Tax Heads

Income tax in India is levied under five heads: Salaries, House Property, Business or Profession, Capital Gains, and Other Sources. A brief description of each head, along with certain examples and their relevance to Indian Navy veterans may be seen in the table below:-

Head of Income	Description	Key Examples	Relevance to Indian Navy Veterans
Income from Salaries	Income from an employer-employee relationship, including wages and pensions.	Basic salary, dearness allowance, HRA, pension, bonuses, perquisites.	Non-commuted pension is taxable here. Commuted pension (exempt u/s 10(10A)) and leave encashment (exempt u/s 10(10AA) for government employees) are not taxed.
Income from House Property	Income from owning a property (rented, self-occupied, or deemed let out).	Rental income, notional rent for deemed let-out property, interest on home loans.	Veterans owning rental properties report income/loss here. Housing benefits (e.g., ECHS-related) are typically non-taxable.
Income from Profits and Gains of Business or Profession	Income from running a business or practicing a profession.	Business profits, professional fees, consultancy income.	Veterans running businesses or consulting post-retirement report income here. Lump sum benefits like gratuity are not taxed under this head.
Income from Capital Gains	Income from the sale/transfer of capital assets (e.g., property, shares).	Short-term capital gains (STCG), long-term capital gains (LTCG) from property, shares.	Veterans selling assets (e.g., property) report gains here. Gratuity and NGIF benefits are not capital gains and remain tax-free.
Income from Other Sources	Residual income not covered under other heads.	Interest on savings/FDs, dividends, lottery winnings, family pension, gifts.	Interest on savings from lump sums (e.g., NGIF) or family pensions is taxable here. NGIF survival benefits and PRDIES payouts are exempt.

Filing Income Tax Returns (ITR)

Filing of Income Tax Returns in India is a mandatory process for individuals whose taxable income exceeds the basic exemption limit or who meet specific criteria under the Income Tax Act, 1961. The process is primarily digital, streamlined through the Income Tax e-filing portal. Below is a step-by-step guide to the procedure for individuals, which would be of relevance to Indian Navy veterans.

Procedure for Filing Income Tax Returns by Individuals

1. Determine ITR Filing Requirement. All individuals with taxable income exceeding the basic exemption limit must file their ITR. For the FY 2024-25, this is as follows:-

• New Tax Regime (default, FY 2024-25): ₹3 lakh (rebate under Section 87A makes tax nil up to ₹7 lakh).
• Old Tax Regime: ₹2.5 lakh (₹3 lakh for senior citizens aged 60–80, ₹5 lakh for super senior citizens above 80).

Other conditions for filing ITR apply to individuals:-

• With gross income above ₹3 lakh, even if taxable income is below the limit after deductions.
• Holding foreign assets, or deposits above ₹1 crore in bank accounts, or expenditure above ₹2 lakh on foreign travel.
• Holding beneficial interest in foreign assets or signing authority in foreign accounts.

2. Choose the Appropriate ITR Form. The IT Dept provides different ITR forms based on the income sources and complexity. Common forms for individuals include:-

ITR Form	Applicability	Relevance to Veterans
ITR-1 (Sahaj)	For individuals with income up to ₹50 lakh from salaries, one house property, and other sources (e.g., interest, family pension).	Suitable for most veterans with pension (taxable under Salaries) and interest income. Not applicable if they have business income or capital gains.
ITR-2	For individuals/HUFs with income from salaries, house property, capital gains, or foreign assets, but no business/profession income.	Used by veterans with investments (e.g., stocks, mutual funds, or property sold generating capital gains) or foreign assets.
ITR-3	For individuals/HUFs with income from business/profession, plus other heads.	Applicable if a veteran runs a business or consultancy post-retirement.
ITR-4 (Sugam)	For individuals/HUFs opting for presumptive taxation with income up to ₹50 lakh from business/profession, plus salaries, one house property, and other sources.	For veterans running small-scale businesses under presumptive taxation.

3. Gather Required Documents. To file an accurate ITR, collect the following:-

• PAN Card: Permanent Account Number for tax identification.
• Aadhaar Card: Mandatory for linking with PAN and e-filing.
• Form 16: Issued by the employer (SPARSH for pensioners) detailing salary/pension and Tax Deducted at Source (TDS).
• Form 26AS: Tax credit statement showing TDS, TCS, advance tax, and self-assessment tax paid (available through the Income Tax portal or TRACES website).
• AIS. The Annual Information Statement (AIS) available through the IT Portal is a comprehensive document introduced recently by the IT Dept to provide taxpayers with a detailed view of their financial transactions for a specific financial year. It is an extension of Form 26AS and aims to enhance transparency, simplify tax compliance, and reduce underreporting of income. While Form 26AS primarily shows details of TDS, TCS and high-value transactions, AIS expands this scope to include additional information such as interest, dividends, stock market transactions, mutual fund transactions, foreign remittances, and more. AIS also provides the taxpayer the option to give feedback on the transactions reported, in case of any discrepancy.
• Bank and FD Interest Statements: For interest income from savings or fixed deposits.
• Investment Proofs: For deductions (e.g., Section 80C for PPF, LIC; Section 80D for health insurance).
• Capital Gains Details: Sale/purchase documents for assets like property, shares or mutual funds.
• Foreign Assets: Details of foreign income (such as capital gains from sale of foreign stocks) or accounts, if applicable.

4. Register/Login to the Income Tax e-Filing Portal

• Go to the Income Tax Portal and login. If you are logging in for the first time, you will have to register on the portal.
• Steps:
  1. Register (if new user): Use PAN as user ID, provide Aadhaar, and set a password.
  2. Login: Enter PAN, password, and CAPTCHA.
  3. Link Aadhaar with PAN (mandatory under Section 139AA) via OTP or biometric verification.

5. Select and Fill the ITR Form

• Steps:
  1. Go to e-File > Income Tax Returns > File Income Tax Return.
  2. Select the Assessment Year (e.g., AY 2025-26 for FY 2024-25).
  3. Choose the appropriate ITR form based on income sources.
  4. Pre-filled Data: The portal auto-populates data from Form 16, Form 26AS, and other sources (e.g., TDS on pension via SPARSH).
  5. Manually enter additional details:
     • Income under each head (Salaries, House Property, Capital Gains, Other Sources).
     • Exempt income (e.g., gratuity, commuted pension, leave encashment for veterans).
     • Deductions under Sections 80C (up to ₹1.5 lakh), 80D, etc.
     • Tax paid (TDS, advance tax, self-assessment tax).
  6. Compute total taxable income and tax liability based on the chosen regime (new or old).
  7. When filing ITR for the first time post retirement, ensure exempt lump sums (e.g., gratuity up to ₹20 lakh, NGIF benefits) are reported under “Exempt Income” to avoid errors.

6. Verify Tax Liability and Pay Taxes (if applicable)

• Steps:
  1. Check the tax payable or refund after computing total income and applying slab rates.
  2. If tax is due, pay via:
     • Self-Assessment Tax: Through net banking or challan (ITNS 280) at authorized banks.
     • Advance Tax: If liability exceeds ₹10,000, pay in installments (15% by June 15, 45% by September 15, 75% by December 15, 100% by March 15).
  3. Update ITR with payment details (BSR code, challan number).

7. Submit and Verify the ITR

• Submission:
  1. Preview the ITR, check for errors, and submit online.
  2. Download the acknowledgment (ITR-V).
• Verification (mandatory within 30 days):
  1. e-Verification (preferred):
     • Aadhaar OTP: Link Aadhaar and verify via OTP.
     • Electronic Verification Code (EVC): Generate via net banking or bank account.
     • Digital Signature Certificate (DSC): For high-income earners or specific cases.
  2. Physical Verification: Sign and send ITR-V to the Centralized Processing Centre (CPC), Bengaluru, within 30 days (rarely used).

8. Track ITR Status and Refunds

• Steps:
  1. Log in to the e-filing portal and check ITR Status under “My Account.”
  2. If eligible for a refund, it is credited to the pre-validated bank account (linked to PAN).
  3. Address any notices from the Income Tax Department (e.g., defective ITR) promptly.