EPFO Pension Arrived Late? Here’s Which Financial Year It Is Taxed In

A pension payment can sometimes reach the bank much later than expected. A missed life certificate or processing delay may push payments into the next financial year. That raises a practical tax question: should the pension be reported in the year it was due or in the year it was actually credited?

For a regular pension received through the Employees’ Provident Fund Organisation (EPFO), the bank credit date does not by itself decide the year of taxation.

How Regular EPFO Pension Is Taxed

Regular pension is generally taxed under the head “Salaries." Salary income is taxable on the earlier of two events — when it becomes due or when it is received.

So, if pension relating to financial year 2025-26 was held back and credited only during financial year 2026-27, it would ordinarily remain taxable for 2025-26 because that was the year in which the amount became due, according to a recent report by Moneycontrol.

The principle also works the other way. If salary or pension is received in advance before it becomes due, taxation may arise in the year of receipt.

An amount already offered to tax on the basis of accrual should not be taxed again merely because the money reaches the bank in a later year.

What If The Return Has Already Been Filed?

The issue becomes more important when a taxpayer has already filed the income tax return without including pension that was due during that year but received later.

For financial year 2025-26, corresponding to assessment year 2026-27, a revised return can generally be filed up to December 31, 2026, provided the assessment has not been completed earlier. A taxpayer who left out such pension income may therefore need to correct the return.

Retain the pension payment order, bank statements and any communication explaining the delay. These can help establish the period to which the pension relates.

Family Pension Follows A Different Route

Family pension is treated differently because it is received by a family member after the death of the employee or pensioner. There is no employer-employee relationship between the recipient and the former employer.

It is therefore generally taxed under “Income from Other Sources”, rather than “Salaries.”

The timing of taxation may depend on the method of accounting consistently followed by the taxpayer. If family pension has traditionally been offered to tax on receipt, a delayed payment may be taxed when received. If income has been recognised on an accrual basis, it may have to be reported for the year to which it relates.

For pensioners, the key is not simply the date on which money enters the bank account. The nature of the pension and the year in which the income became due can determine when the tax liability arises.

FAQs

If my EPFO pension is credited late, which year is it taxed in?
Regular EPFO pension is generally taxable in the year it becomes due, even if the amount is credited to your bank account in a later financial year.

What if I have already filed my ITR without including the delayed pension?
You may need to file a revised return within the permitted deadline if pension taxable for that year was left out of the original return.

Is family pension taxed the same way as regular pension?
No. Family pension is generally taxed under “Income from Other Sources”, and the timing of taxation may depend on the accounting method followed by the recipient.