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Filing Income Tax Returns is not just a yearly formality for government employees, it is a part of financial responsibility and transparency. Whether you are a central, state, or PSU employee, you receive a structured salary with allowances, deductions, and benefits that fall under specific tax rules. Filing your ITR helps report this income correctly, claim deductions like HRA, standard deduction, and investments under Section 80C, and avoid any future notices. It also builds a clean financial record useful for loans, visas, etc.
Latest updates
- ITR filing Due date for FY 2024-25 (2025-26) has been extended from 31st July 2025 to 15th September 2025
Benefits of ITR Filing for Government employees
Helps in claiming eligible TDS refunds
Acts as valid proof of income for personal loan, home loan, business loan, credit card applications and term life insurance policies
Ensures compliance with income tax laws and avoids penalties
Required for processing visa applications in many countries
Builds a strong financial profile and record
Makes it easier to carry forward capital losses
Useful for future reference in case of tax scrutiny or notices
Income tax on Government employees
Government employees are taxed like any other salaried individuals under the Income Tax Act. Their salary structure may include basic pay, dearness allowance, HRA, transport allowance, and various other components. Here’s how income tax applies to them:
Taxable Salary: Entire salary including basic pay, DA, and other allowances (except exempt portions) is taxable under the head “Income from Salary”.
HRA Exemption: If the employee lives in rented accommodation and receives House Rent Allowance, exemption can be claimed under Section 10(13A), subject to conditions.
Standard Deduction: A flat deduction of ₹50,000 (₹75,000 in New tax regime) is available from the gross salary.
Professional Tax: It is allowed as a deduction from salary income.
Deductions under Chapter VI-A:
Section 80C (up to ₹1.5 lakh) for LIC, PPF, GPF, tuition fees, etc.
Section 80D for health insurance premium
Section 80TTA for savings account interest (₹10,000 limit)
Pension Income: For retired government employees, pension is taxable under “Income from Salary”, except for commuted pension in case of government employees which is fully exempt.
New Tax Regime Option: Government employees can opt for the new tax regime under Section 115BAC, which offers lower tax rates but without most exemptions and deductions.
Form 16: Issued by the employer, it contains details of salary paid and TDS deducted, and helps in filing ITR.
In summary, government employees must assess whether the old regime or new regime is more beneficial based on their salary structure and deductions.
Tax Free Income for Government Employees
Government employees enjoy certain tax exemptions and benefits that are specific to their employment status. These exemptions are designed to provide financial relief and incentives to individuals serving in public sector roles. Here is a detailed explanation of some tax-free income sources available to government employees:
Pension: Pension received by government employees can be subject to different tax treatments based on whether it’s commuted or uncommuted. Uncommuted pension, which refers to regular periodic payments, is fully taxable as salary. However, when it comes to commuted or lump sum pension payments, they are exempt from taxes for government employees. This means that any lump sum payment received as part of the pension is not subject to income tax.
Gratuity: Gratuity received by government employees upon retirement or resignation is tax free.
Leave Encashment: Leave encashment received by government employees at the time of retirement or resignation is tax free.
What are Deductions and exemptions available to Government Employees?
Standard deduction of ₹50,000 (₹75,000 for New tax regime) from salary income
House Rent Allowance (HRA) exemption under Section 10(13A), subject to conditions
Leave Travel Allowance (LTA) exemption for travel within India, as per rules
Deduction up to ₹1.5 lakh under Section 80C for LIC, PPF, GPF, tuition fees, principal on housing loan, ELSS, etc.
Deduction under Section 80D for health insurance premium (₹25,000 for self and family, ₹50,000 for senior citizen parents)
Deduction under Section 80TTA for savings account interest up to ₹10,000
Deduction under Section 80E for interest on education loan
Deduction under Section 80G for donations to eligible funds and charitable institutions
Exemption for commuted pension in case of government employees
Transport allowance exemption for specially-abled employees up to ₹3,200 per month
Income tax slab rates for Government employees
Old tax Regime
| Income | Tax rates |
| Upto ₹ 2.50 lakh | 0% |
| ₹ 2.50 lakh – ₹ 5 lakh | 5% |
| ₹ 5 lakh – ₹ 10 lakh | 20% |
| Above ₹ 10 lakh | 30% |
You Can claim deduction under Section 80C, 80D, 80G, etc
For senior citizen (age between 60 & 80 years), tax rate is 0% upto ₹ 3 lakhs. Rest of the rates are same.
For super senior citizen (age above 80 years), tax rate is 0% upto ₹ 5 lakhs. Rest of the rates are same.
In Old tax regime, a maximum tax rebate under section 87A of Rs. 12,500 is available for income upto Rs. 5 lakhs meaning your income is totally tax free till Rs. 5 lakhs. The rebate under section 87A is not allowed to a Non-resident.
New tax Regime (FY 23-24)
| Income | Tax rates |
| Upto ₹ 3 lakh | 0% |
| ₹ 3 lakh – ₹ 6 lakh | 5% |
| ₹ 6 lakh – ₹ 9 lakh | 10% |
| ₹ 9 lakh – ₹ 12 lakh | 15% |
| ₹ 12 lakh – ₹ 15 lakh | 20% |
| More than ₹ 15 lakh | 30% |
New tax Regime (FY 24-25)
Income | Tax Rate |
Upto ₹ 3 lakh | 0% |
₹ 3 lakh – ₹ 7 lakh | 5% |
₹ 7 lakh – ₹ 10 lakh | 10% |
₹ 10 lakh – ₹ 12 lakh | 15% |
₹ 12 lakh – ₹ 15 lakh | 20% |
Above ₹ 15 lakh | 30% |
New tax Regime (FY 25-26)
| Income Range (₹) | Tax Rate |
|---|---|
| Upto ₹ 4 lakh | Nil |
| ₹ 4 lakh – ₹ 8 lakh | 5% |
| ₹ 8 lakh – ₹ 12 lakh | 10% |
| ₹ 12 lakh – ₹ 16 lakh | 15% |
| ₹ 20 lakh – ₹ 20 lakh | 20% |
| ₹ 20 lakh – ₹ 24 lakh | 25% |
| Above ₹ 24 lakh | 30% |
Which ITR form is applicable for government employees?
For most government employees, ITR-1 (Sahaj) is the applicable form if their total income is up to ₹50 lakh and it includes salary income, income from one house property, and income from other sources like interest.
However, if the total income exceeds ₹50 lakh, or if they have income from more than one house property, capital gains, or foreign assets, then ITR-2 will apply.
In rare cases, if the employee has income from business or profession, then ITR-3 may be applicable.
Most salaried government employees typically file ITR-1 or ITR-2.
Steps for ITR filing for Government Employees
Step 1: Gather Necessary Documents as mentioned above
Step 2: Choose the Right ITR Form
You will likely file ITR using Form ITR-1 or Form ITR-2, depending on your income sources.
Step 3: Fill in the Details
Ensure you input accurate information regarding your income, deductions, and tax payments. Double check to avoid any errors that might lead to complications later on.
Step 4: Claim Deductions
You are entitled to various deductions under Section 80C (like investments in PPF, LIC, etc.), Section 80D (health insurance premiums), and Section 80G (donations). Claim these deductions wisely to minimize your tax liability.
Step 5: Submit and Verify
Once you have filled in all the required details and submitted the ITR, it’s time to verify your return. You can do this electronically using Aadhaar OTP, Net Banking, or by sending a signed physical copy.
Step 6: Keep Records
After filing your ITR, maintain copies of the filed return, acknowledgment receipt, and supporting documents for future reference. These records are essential for income tax notice.
Due date of ITR filing for Government Employees
The Due date to file Income tax return for FY 2024-2025 (AY 2025-2026) is 31st July,2025 which is extended to 15 th September, 2025.
In case you miss this deadline then you can file belated ITR till 31st December, 2025 with late fees.
Also for any mistake made while filing ITR before due date, you can make corrections by filing Revised ITR any number of times till 31st December, 2025
If you miss deadline of Belated income tax return filing then you can file Updated ITR (ITR U) till 4 years from the end of relevant assessment year with late fees and additional taxes.
What are the Consequences of non-payment of Tax and non-filing of ITR?
Failing to pay taxes and file your Income Tax Return (ITR) has severe consequences. Firstly, unreported income is deemed illegal, equating to tax evasion, and can result in a penalty of 100% to 300% of the evaded tax under Section 271(C). Secondly, a penalty ranging from 10% to 90% of the undisclosed amount may be imposed under Section 271AAB, depending on the circumstances. Lastly, if you miss the filing deadline, a 1% interest per month or part thereof will be charged on the unpaid tax amount as per Section 234A.
Looking for help?
At A R Dhorajiya & Co., we specialize in income tax return filing for government employees. From choosing the right ITR form to optimizing deductions, we ensure complete compliance with minimal effort on your part.
Let us handle your taxes so you can focus on your job.
Contact us today at +91 9769647582 for a consultation or to get started with your ITR filing
Frequently Asked Questions
ITR-1 is applicable if the total income is up to ₹50 lakh and includes salary, one house property, and income from other sources. If income exceeds ₹50 lakh or includes capital gains, more than one house property, or foreign income/assets, then ITR-2 should be used.
Yes, if the total taxable income exceeds the basic exemption limit (₹2.5 lakh for individuals below 60), filing ITR is mandatory. It is also advisable to file even if income is below the limit, to claim Tax refunds or maintain income proof.
Government employees can log in to the income tax portal, select the applicable ITR form (usually ITR-1 or ITR-2), prefill the form using Form 16 and AIS data, enter deduction details, and file after verifying the summary. It can be filed online or using offline utilities.
Generally, ITR-3 is not applicable unless the employee has income from business or profession. If a retired government employee is working as a consultant or earning from a proprietary business, then ITR-3 may be applicable.
Fully taxable under the head “Income from Salary”. It is treated similar to regular salary and should be included while filing ITR.
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