However, income tax rules offer additional tax benefits to senior citizens. To claim these benefits, the individual must be of the age of 60 years or above but less than 80 years at any time during the respective year.
The Income Tax filing cycle has started for the financial year 2024 and assessment year 2024-25. Like all jobholders, senior citizens are also required to pay income taxes and file returns.
However, income tax rules offer additional tax benefits to senior citizens. To claim these benefits, the individual must be of the age of 60 years or above but less than 80 years at any time during the respective year. Taxpayers above 80 years are marked as super senior citizens.
As per the Income-Tax Act, 1961, an individual resident who is 60 years or above in age but less than 80 years at any time during the previous year is considered as Senior Citizen for Income Tax purposes. A Super Senior Citizen is an individual resident who is 80 years or above, at any time during the previous year.
For the financial year 2023-24, tax-saving investments made by March 31, 2024, will be considered for income tax returns. The new tax regime excludes benefits like Section 80C for medical insurance premiums, interest income. The old regime still offers benefits under different sections.
Business Today spoke to Dr Suresh Surana, Founder, RSM India, about tax slabs and benefits for senior citizens.
Here are the top points:
The taxable income for senior citizens is subject to specific tax rules and exemptions. The taxable income is calculated for senior citizens as follows:
1. Income Sources: Consider all sources of income, including salary, pension, interest income from savings accounts, fixed deposits, rent from property, capital gains from investments, etc.
2. Exemptions and Deductions: Senior citizens are eligible for higher deduction limits as well exemption benefits compared to other taxpayers. Accordingly, senior citizens would be required to take into consideration such higher limits for deductions and exemptions while calculating their taxable income.
For instance, additional deductions under Section 80D (health insurance premium), Section 80TTB (interest income from deposits), benefit of deduction u/s 80C (for investment in Senior Citizens Savings Scheme) etc., are available for senior citizens.
3. Calculation of Taxable Income: By subtracting the eligible exemptions and deductions from the total income, we will get the taxable income. For example, if a senior citizen has a total income of Rs 10,00,000, and avails of the full benefit of the basic exemption limit of Rs 3,00,000 and deductions under various sections amounting to Rs 50,000, the taxable income would be Rs 6,50,000.
4. Tax Calculation: Once the taxable income is determined, apply the applicable tax rates to calculate the tax liability. It is pertinent to note that senior citizens and super senior citizens enjoy a higher basic exemption limit of Rs 3 lakhs and Rs 5 lakhs, respectively.
However, no such benefit of higher basic exemption limit is available under the new tax regime. The applicable tax rates for Financial Year 2023-24 under the old tax regime and new tax regime (default) are as follows:
| Income Slabs | Old Tax Regime | Income Slabs | New Tax Regime (Default tax regime) | |
| Tax Rate for Senior Citizens
(60-80 years) |
Tax Rate for Super Senior Citizens
(80 years and above) |
Tax Rate for Senior Citizens & Super Senior Citizens | ||
| Up to Rs 3,00,000
|
Nil | Nil | Up to Rs 3,00,000 | Nil |
| Rs3,00,001 to Rs 5,00,000 | 5% | Nil | Rs3,00,001 to Rs 6,00,000 | 5% |
| Rs 5,00,001 to Rs 10,00,000 | 20% | 20% | Rs 6,00,001 to Rs 9,00,000 | 10% |
| Above Rs 10,00,000 | 30% | 30% | Rs 9,00,001 to Rs 12,00,000 | 15% |
| Rs 12,00,001 to Rs 15,00,000 | 20% | |||
| Above Rs 15,00,000 | 30% |
5. Rebate u/s 87A: Calculate the applicable rebate under Section 87A. Senior citizens would be eligible for a rebate under Section 87A if their total income is up to a specified limit (Rs. 5 lakhs under the old tax regime and Rs. 7 lakhs under the new tax regime). Such rebate would be lower of the actual tax amount or Rs. 12,500 (enhanced to Rs. 25,000 in case of new tax regime).
6. Surcharge & Health and Education Cess: The applicable surcharge, if any and health and education cess @ 4% would be computed to arrive at the final tax liability. In case there are any interest consequences or penalty/ late filing fees, the same would be added to the tax liability amount.
Taxability of Pension
The taxability of Pension would depend upon the nature of Pension as follows:
> Government Pensions: Commuted Pension income (i.e. receivable in lump sum immediately) from the government is fully exempt not subject to any tax rates. Uncommuted Pension income would be taxable under the head “Salaries” and is subject to the applicable marginal slab rates.
> Pension from other than Government (Private Sector Company): Commuted Pension income received from private companies is taxable under the head “Salaries” and is subject to the applicable tax rates. However, an exemption u/s 10(10A) is provided as follows:
> One-third of the amount of commuted pension which the employee would have received had he commuted the whole of pension shall be eligible for exemption provided such employee is also in receipt of gratuity.
> One-half of the amount of commuted pension which the employee would have received had he commuted the whole of pension shall be eligible for exemption in case where such employee has not received any income in the nature of gratuity.
> Uncommuted Pension income would be taxable under the head “Salaries” and is subject to the applicable marginal slab rates.
Tax regimes for seniors with NPS
> Old tax regime allows various deductions and exemptions which otherwise may not be allowed under the new tax regime u/s 115BAC. If an individual follows old tax regime, then he is eligible for the following deductions pertaining to the pension income. A taxpayer derives the following benefits from NPS:
Tax benefits on Partial withdrawal from NPS account
Taxpayer would be eligible for tax exemption on the amount withdrawn upto 25% of the self contribution, on such terms and conditions as may be specified by PFRDA u/s 10(12B).
Tax benefit on Lumpsum withdrawal
Taxpayer would be eligible for tax exemption on lumpsum withdrawal of 60% of accumulated pension wealth upon attaining the age of 60 or superannuation under section 10(12A).
Source: https://www.businesstoday.in/personal-finance/tax/story/itr-filing-how-the-taxable-income-is-calculated-for-senior-citizens-for-income-tax-returns-check-top-points-here-429796-2024-05-16
© 2018 CA Chandan Agarwal. All rights reserved.