I am over 70, do I pay any tax on my pension at all?

What does the law say?

Pension is salary. Section 12(2)(f) of the Income Tax Ordinance, 2001 counts “any pension or annuity, or any supplement to a pension or annuity” as salary. The Finance Act 2025, in section 10, then inserted section 12(2A), which has two parts.

• Clause (i) charges pension from a former employer as a final tax at the rates in the pension table (the proviso to clause (2) of Division I of Part I of the First Schedule), and ends with the words: “the individual who has attained the age of seventy years shall not be charged to tax on pension income”.
• Clause (ii) says the pension of an individual who continues to work for the former employer or its associate is taxed at the ordinary rates in clause (1) or (2) of Division I.

The withholding rule follows the same line. Section 149(1A) requires the payer to deduct tax on pension above ten million rupees only for “a former employee who is below the age of seventy years”. For a pensioner aged seventy or more, section 149(1A) does not apply.

How does it work in practice?

For tax year 2027 (1 July 2026 to 30 June 2027), the rules sort pensioners into three groups:

Your position	Rule	Tax on the pension
Below seventy, pension from former employer up to Rs. 10,000,000	Pension table, row 1	0%
Below seventy, pension above Rs. 10,000,000	Pension table, row 2, deducted under section 149(1A)	5% of the amount above Rs. 10,000,000
Seventy or older	Section 12(2A)(i), last words	Not charged

The pension payer has no deduction duty under section 149(1A) once you are seventy. The Ordinance does not set out how the payer is to verify age; that is a matter of the payer’s own records and any procedure outside this corpus.

Worked example (illustrative figures)

Two retired bank officers in Karachi each receive a pension of Rs. 1,100,000 a month, Rs. 13,200,000 for tax year 2027. Neither works for the former bank.

Rashid, aged 68

1. Amount above ten million: Rs. 13,200,000 - Rs. 10,000,000 = Rs. 3,200,000.
2. Tax at 5%: Rs. 3,200,000 x 5% = Rs. 160,000, deducted by the payer under section 149(1A).

Zubair, aged 73

1. Section 12(2A)(i): an individual who has attained seventy “shall not be charged to tax on pension income”.
2. Tax on the pension: Rs. 0. Section 149(1A) does not apply to him, because he is not below seventy.

The difference in this example is Rs. 160,000 a year. For a pensioner below seventy whose pension is Rs. 10,000,000 or less, the age rule changes nothing in rupee terms, because the pension table already charges 0%.

What does the age rule not cover?

• Other income. The words are “pension income”. Rent, profit on bank deposits or savings certificates, dividends and business income are taxed under their own provisions. This page does not cover those rates.
• Continuing work for the former employer. Section 12(2A)(ii) sends the pension of someone who keeps working for the former employer or its associate to the ordinary slab rates. Section 12(2A) does not state which clause wins when both apply, so the position of a person over seventy who still works there is not settled by the text.
• Lump sums. Commutation and gratuity are dealt with in separate Second Schedule clauses, not in section 12(2A). See the related pages.

What if I turn seventy halfway through the year?

The text uses “has attained the age of seventy years” in section 12(2A)(i) and “below the age of seventy years” in section 149(1A). It does not say whether age is tested on the first day of the tax year, the last day, or at each payment. This page does not resolve that point.

Common mistakes

• Assuming the rule is a general senior citizen exemption. Section 12(2A)(i) removes only pension income from charge.
• Thinking seventy-plus pensioners fall under section 149(1A). That sub-section is limited to former employees below seventy.
• Expecting a ten million limit to apply after seventy. No amount is attached to the age seventy wording.
• Relying on the old clause (8) exemption. It was omitted by the Finance Act 2025; the age rule now sits in section 12(2A).

What to check in the official text

Read section 12(2A) and section 149(1A) of the Ordinance amended to 30 June 2026, and the pension table in the proviso to clause (2) of Division I of Part I of the First Schedule in the official PDF, since our site copy does not reproduce rate tables. Section 10 of the Finance Act 2025 shows the text of section 12(2A) as it was inserted. Whether you must still file a return when no tax is charged on the pension is a separate question, covered on the related page about filing returns.