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Taxation for Senior Citizens and Pensioners: Calculating Income Tax

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Last Updated on February 9, 2024 by Kanakkupillai

Income tax slab for senior citizens for FY 2023–2024

Existing tax regime

New tax regime

Income slabs Income tax rates Income slabs Income Tax rate
Up to Rs. 3,00,000 Nil 0 to Rs. 3,00,000 Nil
Rs. 3,00,001 to Rs.  5,00,000 5% above Rs. 3,00,000 Rs. 3,00,000 to Rs. 6,00,000 5%
Rs. 5,00,001 to Rs. 10,00,000 Rs. 10,000 + 20% above Rs.  5,00,000 Rs. 6,00,000 to Rs. 9,00,000 10%
Above Rs. 10,00,000 Rs. 1,10,000 + 30% above Rs.  10,00,000 Rs. 9,00,00 to Rs. 12,00,000 15%
Rs. 12,00,000 to Rs. 15,00,000 20%
Above Rs. 15,00,000 30%

 

Other tax slabs for senior citizens in 2023–2024

Senior citizens must pay education cess and other higher education cess on top of their income tax and regular income tax. According to the rates listed above, this table is used to calculate these two taxes:

Annual income slabs Education cess Secondary and Higher education cess
Below 3 lakh Nil Nil
Above Rs. 3 lakh but less than Rs. 5 lakh 2% of income tax paid 1% of income tax paid
Above Rs. 5 lakh but less than Rs. 10 lakh 2% of income tax paid 1% of income tax paid
Above Rs. 10 lakh 2% of income tax paid 1% of income tax paid

 

Calculation of income tax for senior citizens in 2023–2024

The old or existing tax regime rates listed in Table 1 are used to calculate taxes for senior citizens. Income from any residential property is considered in the income tax calculation in addition to any applicable deductions. Since the non-senior citizen’s free limit is only up to Rs. 2.5 lakhs, seniors receive an additional advantage of Rs. 50,000.

You need precise information on fixed pay, basic salary, fixed allowances, housing rent allowance, special allowance, variable pay, medical components, and any other taxable components to compute income tax for the elderly. Further, you should know the tax-saving programmes for which older citizens have signed up or are automatically eligible.

For instance, tax is not considered when calculating tax-exempt pay components like HRA and investments made under Sections 80C, 80D, 80DD, 80L, etc. 

Nowadays, most websites provide income tax aggregators or calculators that allow you to figure out any salaried person’s gross pay and net income. The tool will approximate your net income after you enter the principal components of your pay and any other exempt components. In addition, some websites provide an Excel calculator that may be downloaded and used to figure senior citizen tax.

Exemptions for senior citizens

Compared to other Indian citizens, all senior citizens are eligible for a wide range of advantages.

Senior citizens additionally receive advantages under Sections 80 C, 80 D, and 80 DDB in addition to the free cap of Rs. 3 lakh.

Senior citizens are additionally exempt from taxes on health insurance premiums up to Rs. 30,000. In addition, they are eligible for payments of between Rs. 60,000 and Rs. 80,000 for medical care.

Service tax on the premium amount is not required for senior citizens. They are not even required to pay taxes on the gifts they offer to others.

If the 15% threshold is left in place, short-term capital gains will not be subject to tax for older citizens.

In addition, Section 80 L contains a tax exemption clause. Under this provision, they are eligible for an exemption from interest up to Rs. 12,000 per year.

If senior citizens have no revenue from their business, they are also free from paying advanced tax. They are only liable to pay self-assessment tax in these circumstances on the amount corresponding to their overall income.

Senior citizens are exempted from paying tax on interest that has been generated

Seniors are also exempt from paying taxes on the money they receive through the reversed mortgage scheme. This goes against the home loan programme. According to this plan, senior citizens who mortgage and continue living in their homes will get lifetime payments. A senior citizen retains ownership in this situation.

For the non-deduction of tax deduction at source (TDS) on the interest earned on fixed deposits, they might submit Form 15H. This is only valid if senior citizens are automatically exempt from tax requirements since they are in the zero-tax category.

Filing of income tax returns for senior citizens

All senior Indians who receive a salary must file income taxes, just like every other citizen of the nation. They must submit an income tax return or ITR to request their tax refund. For income tax returns, they must complete the two forms listed below.

ITR 1: This is for people whose income includes the following in total:

  • Salary or pension income
  • Income from own house or owned property
  • Income from any other sources

ITR 2: This is for people whose income includes the following in total:

  • Salary income or pension income
  • Income from house or owned property
  • Short- or long-term capital gains
  • Income from any other sources
  • Incidents where income from any other members of the family is combined, such as that of a spouse
  • Rebate scheme in income tax for senior citizens

This programme is available to anyone whose annual income does not exceed Rs. 5 lakh. Section 87A permits the provision of this rebate. For those with an annual salary of Rs. 5 lakhs, a rebate of Rs. 2000 is available. As a result, an individual will owe Rs. 23,000 in taxes overall.

However, the total tax for a person whose income exceeds Rs. 5 lakh will be Rs. 25,000 plus 20% tax.

Other benefits for senior citizens

Senior and super-senior citizens are eligible for several enhanced or additional advantages in addition to the tax benefits that apply to all taxpayers, regardless of age. The following benefits are also covered:

Paper filing of an income tax return

Super senior citizens (those who are 80 or older) can submit their ITR in offline or paper form using Forms 1 or 4. They still have access to the e-filing of the ITR option.

Relief from the payment of advance tax

Each individual must pay their advance tax as required by Section 208 if their estimated tax due for the year is Rs. 10,000 or more. However, Section 207 exempts a resident senior citizen from paying advance tax. A senior citizen who lives there without income from a company or profession is, therefore, exempt from paying advance tax.

Interest on bank deposits is deductible from income taxes

The Income Tax Act’s Section 80TTB permits tax breaks on interest earned on deposits made with banks, post offices, or cooperative banks. The older citizen may deduct up to Rs. 50,000 in interest income from their income.

Tax advantages relating to medical expenses and insurance

Senior citizens are eligible for a larger deduction for paying the premium for a medical insurance policy of up to Rs. 50,000 under Section 80D of the Income Tax Act.

Conclusion

Given the preceding, this blog has briefly explained how our government handles the taxation of senior citizens and pensioners.

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