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Do retirees in Israel get an income tax exemption on their pension?

Yes. Section 9A of the Income Tax Ordinance [New Version] 5721-1961 exempts part of a qualifying pension once the recipient reaches retirement age. Amendment 190 raised the exemption in stages, and from 2025 the rate is 67 percent of the ceiling qualifying pension, which stands at roughly NIS 9,400 per month. That produces about NIS 6,300 of tax-free pension income each month for someone who has not used the allowance elsewhere. Severance pay taken tax-free on leaving employment reduces the exemption under a statutory offset formula.

The exemption attaches to the person rather than to a particular fund. Retirement age is 67 for men, and for women it is rising in stages from 62 toward 65, which places it in the mid-sixties during 2026. The relief applies to the ceiling amount published annually by the Israel Tax Authority rather than to the whole pension, so a pension above that ceiling is exempt only up to the ceiling figure. The offset in Section 9A reduces the allowance where the taxpayer received tax-free severance pay in the fifteen years before retirement, which is why the severance decision and the pension decision have to be modeled together.

The exemption is not applied automatically by the paying fund. A retiree files Form 161D with the Israel Tax Authority to fix the exemption, and the assessing officer issues a determination that the fund then applies to each monthly payment. Filing late is possible, and refunds can generally be claimed for the six preceding tax years. New immigrants should note that this relief sits separately from the ten-year exemption on foreign-source income, and that a pension paid from abroad is dealt with under different rules. The Israeli income tax brackets then apply to whatever balance remains taxable.

⚖ In Practice
  • Governing law: Section 9A, Income Tax Ordinance [New Version] 5721-1961, as amended by Amendment 190
  • Competent authority: Israel Tax Authority (Rashut HaMisim), assessing officer for the taxpayer's district
  • Exemption rate: 67 percent of the ceiling qualifying pension from 2025 onward, up from 52 percent for 2020 to 2024
  • Amounts: ceiling qualifying pension of approximately NIS 9,400 per month (2026), producing roughly NIS 6,300 of exempt pension income per month
  • How to claim: file Form 161D with the assessing officer; refunds for earlier years are generally available for up to six tax years back
  • Interaction: tax-free severance received in the fifteen years before retirement reduces the exemption under the statutory offset; the National Insurance old-age allowance is exempt separately and does not consume the Section 9A allowance

From the full guide: Israeli Income Tax Rates 2026: A Complete Guide for Foreign Nationals, Expats and New Immigrants

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Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

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