I am over 70. Do I pay any tax on my pension at all?

Is pension taxed once I reach seventy?

No. Section 12(2A)(i) of the Income Tax Ordinance, inserted by section 10 of the Finance Act 2025, says that “the individual who has attained the age of seventy years shall not be charged to tax on pension income”. The Ordinance as amended to 30 June 2026 keeps this rule, so it applies to tax year 2027 (1 July 2026 to 30 June 2027).

The sentence sits inside the same clause that sets up the pension table. Section 12(2A)(i) first sends pension from a former employer to the rates in the proviso to clause (2) of Division I of Part I of the First Schedule (0% up to Rs. 10 million, 5% of the amount above that), and then carves out pensioners aged seventy or above. For them, the table is never reached.

Does the size of the pension matter?

Not for the age rule. The Rs. 10 million threshold belongs to the pension table. The seventy-year rule in section 12(2A)(i) is not tied to an amount. A retired professor in Peshawar with a modest pension and a retired senior judge with a pension well above Rs. 10 million are treated the same once each has attained seventy.

How does it work in practice?

The collection side matches the charging side. Section 149(1A) requires a person paying pension to deduct tax on the amount over Rs. 10 million, but only for a former employee “who is below the age of seventy years”. A pension-paying office or bank paying a pensioner aged seventy or more has no duty under section 149(1A) to deduct tax from that pension.

Worked example (illustrative figures)

Mr. Ghulam Rasool, aged 74, Faisalabad, receives a pension of Rs. 1,100,000 a month for tax year 2027 from his former employer. He does not work for the former employer or any associate.

1. Annual pension: Rs. 1,100,000 x 12 = Rs. 13,200,000
2. If he were below seventy, the pension table would apply: Rs. 13,200,000 - Rs. 10,000,000 = Rs. 3,200,000; 5% x Rs. 3,200,000 = Rs. 160,000
3. He has attained seventy, so section 12(2A)(i) says he “shall not be charged to tax on pension income”.
4. Tax on the pension: Rs. 0

Step 2 is shown only to make the effect of the age rule visible.

What does the relief not cover?

Other income. Section 12(2A) is about “pension under clause (f) of sub-section (2)” of section 12, meaning pension and annuity counted as salary. It says nothing about profit on bank deposits, rent, dividends or business income. Those are taxed under their own provisions whatever the person’s age.

Working for the former employer. Section 12(2A)(ii) is a separate rule: “the pension of an individual who continues to work for former employer or its associate shall be charged to tax at the rates specified under clause (1) or (2) of Division I”. The Ordinance does not say which of the two sub-clauses wins where a person over seventy still works for the former employer. The text leaves that open, and this page does not resolve it.

Lump sums. Commutation, gratuity and provident fund payments are dealt with under other provisions and clauses of the Second Schedule, not by the age seventy rule.

What if I turn seventy partway through the tax year?

Section 12(2A)(i) uses the words “has attained the age of seventy years”, and section 149(1A) uses “below the age of seventy years” in relation to the time of payment. Neither provision says whether the age is tested on the first day of the tax year, the last day, or payment by payment. The law is silent on how a pension received partly before and partly after the seventieth birthday is split.

Common mistakes

• Thinking the Rs. 10 million limit still applies at seventy. It does not; the age rule is separate from the pension table.
• Thinking every kind of income becomes tax-free at seventy. The words in section 12(2A)(i) are “pension income”.
• Assuming the age rule overrides the working-for-former-employer rule. The Ordinance does not say that.

What to check in the official text

Read section 12(2A)(i) and (ii) and section 149(1A) in the Ordinance amended to 30 June 2026. The same wording appears in section 10 of the Finance Act 2025, which inserted it. The Ordinance does not say in these provisions how a pension payer is to verify age. Filing obligations and any separate senior citizen provisions are outside the scope of this page.