Senior citizens are a substantial demographic segment of the population and contribute to the economic system. Their income sources can be pensions, rental income, interest earnings, or even business earnings. Either way, as a senior citizen, you need to plan your income and expenses for a stable financial position. Tax is one of the significant expenses for every individual, be it a working professional or a retired senior citizen. Knowing more about the law is crucial if you want to plan and reduce your tax obligations as a senior citizen. If you want to plan your income or your senior citizen parents, here’s everything you should know about the Income Tax Slab for Senior Citizens FY 2021-22.
Tax Exemption for Senior Citizens
Senior citizens are not excused from filing income tax returns under the Income-tax Act of 1961. But the Finance Act of 2021 has added a new section 194P to help senior individuals (75 years of age or above) lessen the burden of compliance.
Calculation of Income Tax for Senior Citizens
Income Tax Slab | Rate of Tax | Health and insurance cess |
Maximum 3 lakhs | No tax | Not Applicable |
3 lakh to 5 lakh | 5% | 4% of income tax |
5 lakh to 10 lakh | 20% | 4% of income tax |
Exceeding 10 lakhs | 30% | 4% of income tax |
- The maximum amount of income tax exempted is Rs. 3 lakh
- A surcharge of 10% of income tax is applied if the total income exceeds Rs. 50 lakh and up to Rs. 1 crore
- 15% of income tax is added as a surcharge if total income exceeds Rs. 1 crore
Income Tax Benefits for Senior and Super Senior Citizens in India
Here are some benefits that senior and super senior citizens both can actually avail:
Limit on Senior and Super Senior Citizens’ Tax Exemption:
For seniors, the basic exemption threshold is greater. An individual is not required to pay taxes to the government up to a certain income level, which is known as a basic exemption limit. The exemption ceiling is Rs 2.5 lakh for general residents, Rs 3 lakh for senior people, and Rs 5 lakh for super senior persons each FY.
Limit on Senior and Super Senior Citizens’ Tax Exemption:
For seniors, the basic exemption threshold is greater. An individual is not required to pay taxes to the government up to a certain income level, which is known as a basic exemption limit. The exemption ceiling is Rs. 2.5 lakh for general residents, Rs. 3 lakh for senior people, and Rs. 5 lakh for super senior persons each FY.
Exemption under Section 80 TTB for Interest Income from Deposits:
To supplement their daily income, senior adults typically choose from a variety of fixed deposit interest income sources. They choose for FDs because they offer stability and security that equity-linked investments do not. Regarding tax benefits, section 80 TTB allows senior individuals to deduct interest payments up to 50,000 made on fixed deposits with banks, post offices, and cooperative banks for a given fiscal year. For young resident taxpayers in India, the same is much lower at 10,000.
Deduction for Medical Expenses Under Section 80DDB:
Senior citizen taxpayers are permitted to claim a deduction of up to 1 lakh on the amount they paid for medical care for a few specific diseases under Section 80DDB of the Income Tax Act.
Reverse Mortgage Scheme:
Senior citizens can reverse mortgage their accommodation for monthly earnings. The ownership is with the senior citizen, and the monthly instalments are tax-free. You can enjoy these deductions under the Income Tax Slab for Senior Citizens. It would reduce your taxes, help you save more, and spend your hard-earned money to enjoy your retirement time. Ensure that you correctly assess your tax obligations and get expert help. Furthermore, include your incomes from all the sources and reduce the applicable deductions to know what you have to pay.
Tax slabs for senior citizens and super senior citizens
For senior citizens aged 60 years or more but below 80 years
A resident who was at least 60 years old but under 80 years old at any point in the pertinent prior year is considered a senior citizen. For the purposes of receiving income tax advantages or senior citizen status in regard to FY 2021-22/AY 2022-23, a person born on or before 01/04/1962 shall be deemed to have reached the age of 60 as of 31/03/2022.
For super senior citizens
A resident who was at least 80 years old at any point in the pertinent prior year is referred to as a very senior or very senior citizen. For the purpose of receiving income tax advantages or status as a “super/very senior citizen” in respect of FY 2021-22/ AY 2022-23, a person born on or before 01/04/1942 will be deemed to have reached 80 years of age as of 31/03/2022.
Calculation of tax for senior citizens
Senior citizens’ income taxes are calculated in the same way as the income taxes of other individual taxpayers. The five separate income heads are all calculated using the same formula. Seniors can apply for income exemptions and tax deductions after determining their gross total income. The net taxable income will be this amount. You must next determine the tax liability using the corresponding tax slab rate. Senior citizens and super senior citizens can choose the new tax regime, just like other individual taxpayers. They would not, however, benefit from a larger basic exemption level under the new tax system. Choose accordingly.
Deduction under Section 80C
Bank fixed deposits having a 5-year duration are eligible for tax benefits under Section 80C of the Income Tax Act. Only senior citizens are exempt from paying taxes on interest income from fixed deposits up to Rs. 50,000.
Read More: 80c Investment Options
Deduction under Section 80CCC
The amount spent on a new insurance’s purchase or payments made toward the renewal or continuation of an existing policy are both included in the Section 80CCC exemption limit. The policy for which the money was paid must be offering a pension or a periodic annuity in order to qualify for this exemption. When read in conjunction with Sections 80C and 80CCD(1), Section 80CCC places a cap on the total exemption amount at Rs. 1,50,000 per year.
Deduction under Section 80CCD(1B)
The government amended Section 80CCD by adding a new subsection, Section 80CCD, in the 2015 Union Budget (1B). This was done to increase investment in the Atal Pension Yojana and NPS programs. When making contributions to NPS or the Atal Pension Yojana, people who are employed or self-employed can deduct an extra 50,000 under Section 80CCD(1B). This deduction is in addition to the maximum allowed under Section 80CCD (1). Make sure there isn’t a duplicate claim while making this claim, meaning avoid claiming the same contribution amounts under two different sections.
Deduction under Section 80D
The Income Tax Act also has a provision in Section 80D for super senior people who are 80 years of age or beyond. According to Income Tax Section 80D, super old individuals without health insurance can additionally deduct up to Rs 50,000 every fiscal year for doctor visits and treatments. However, their personal expenses are not eligible for this 80D deduction. An illustration. Let’s say you are 60 years old and have a Rs 30,000 annual health insurance premium for both you and any dependents. Additionally, you are paying a premium of Rs 35,000 for the health insurance of your parents, who are super senior citizens and are 80 years old. As a result, the following advantages are available to you under Section 80D of the Income Tax Act:
- Tax break of Rs 30,000 on the Rs 30,000 in health insurance premiums you paid for yourself, your dependents, and others.
- Benefits from taxes in the amount of Rs. 35,000 on the price of medical procedures and health examinations for your parents, who are very senior persons.
Therefore, under Section 80D of the Income Tax Act of 1961, a tax deduction of Rs 65,000 may be requested.
Deduction under Section 80DD
You can claim a tax deduction for medical costs incurred for the care of a dependent who has a disability under Section 80DD. It includes the medical costs related to caring for, educating, treating, maintaining, and rehabilitating a dependent who has a disability. Dependents include your parents, kids, spouse, and/or siblings. If a dependent person has a disability that is 40% or greater, you may be eligible for tax benefits of up to Rs. 75,000, and if the condition is serious and is 70% or greater, you may be eligible for benefits of up to Rs. 1.25 lakh. When submitting your income tax returns, you must present a supporting medical certificate confirming your impairment. Verify that the government’s central or state medical board issued the medical certificate.
Deduction under Section 80DDB
Additionally, medical expenses spent for the treatment of specific diseases or illnesses are eligible for tax deduction under section 80DDB. If you are under 60 years old, you are eligible for an annual deduction of up to Rs 40,000 for the expense of treating certain conditions. However, the section 80D medical expense deduction maximum for senior citizens and super senior citizens is Rs 1 lakh for the medical treatment expenses incurred on particular conditions in a financial year. The expenditures of treating diseases like as cancer, chronic renal failure, Parkinson’s disease, AIDS, etc. may be deducted from income under Section 80DDB.
Deduction under Section 80G
Any contribution to a relief fund or nonprofit organization is deductible. When determining the overall taxable income, this deduction is possible. For deductions on donations, however, the following restrictions apply:
- Not all donations are eligible for a full deduction. When requesting a deduction, every assessee must mention the organization’s eligibility.
- Any assessee, such as an individual taxpayer, an Indian company, a partnership firm, etc., may claim a deduction.
- Any form of donation—such as one of clothing, food, medicine, etc.—is not eligible for a tax credit or advantage.
- The gift varies depending on the requirements. According to the provisions of section 80G, the deduction might be either 100% or 50% with or without restrictions.
- Over Rs 2,000 in cash donations are not eligible for a tax deduction.
Deduction under Section 80GGC
Under section 80GGC, any individual taxpayer may make a deduction claim. The municipal authority or artificial judicial person is not qualified to make a deduction under this section. Furthermore, donations that are eligible for deductions under Section 80GGC should not come from the bank by check, internet banking, demand draught, debit card, or wire transfer. Cash contributions made to any political party or election body by an individual are not deductible under Section 80GGC.
- Political Party: An organization or entity of a citizen of India that is registered with the Election Commission is referred to as a political party.
- Electoral Trusts: A non-profit organization called an electoral trust, sometimes known as a Section 8 company, was established in India to collect voluntary contributions from any individual and to distribute those funds to the appropriate political parties. An electoral trust’s primary goal is to donate the funds it has raised to a certain political party.
Deduction under Section 80RRB
You have the right to follow any authorized vocation or occupation to make a living as an Indian citizen in good standing. There are several ways to make money, such as through job or your own business. Royalty payments are one such source of income for many citizens. A person receives a royalty payment from another party in exchange for using a specific piece of their creative work. Among them might be writings, works of art, music, and inventions. Royalty payments are often ongoing and can last anywhere from a predetermined timeframe to the recipient’s passing. If you fall into this group as well and receive royalties for your work, you may be able to deduct certain expenses under Section 80RRB of the Income Tax Act of 1961.
Deduction under Section 80TTB
Senior folks’ finances suffer greatly as a result of the physical and mental health issues that are frequently linked to old age. As a result, it’s important to give them the appropriate reliefs in the form of tax deductions. With this in mind, the government constantly proposes new regulations to make life easier for senior persons. The 2018 Finance Budget has made the decision to add a number of perks for our senior residents. One such significant change in the 2018 Budget (for seniors) is the addition of a new provision, Section 80TTB.
Deduction under Section 80U
A resident who has received a disability certification from a medical authority is eligible to claim the tax benefit under Section 80U. A person with a disability is someone who, according to the medical authorities, has at least a 40% disability for the purposes of this provision.
The following list serves as a definition of disability for the purposes of this section: blindness, poor eyesight, leprosy eradication, hearing loss, locomotor impairment, mental retardation, and mental illness
Other than the disability certification from a reputable medical authority in Form 10-IA, there is no other documentation needed. There is no need to present receipts for the costs associated with seeking treatment or other expenses. The medical certificate indicating the disability must be submitted with the income tax returns required by Section 139 for the applicable AY in order to make a claim under this section. One may still make such deductions in the year in which the disability assessment certificate expires even though the certificate has expired. The following year’s certificate would be needed to collect the benefits under section 80U, though.
Income Tax Filing for Senior Citizens
Senior citizens and very senior citizens are not excused from filing income tax returns under the Income-tax Act of 1961. But the Finance Act of 2021 has added a new section 194P to help senior individuals (who are 75 years of age or above) and lessen the burden of compliance on them. If the deductee maintains an account with the bank where he receives his pension income, the bank is required to deduct tax under this rule. According to this new rule, the tax must be subtracted if the receiver is a resident with a minimum age of 75 at any point in the year and the following criteria are met:
- Only pension income and interest received or owed from any accounts held with the deductor (such bank) constitute the deductee’s total income;
- Deductee has given the deductor a declaration including the necessary information.
If the aforementioned requirements are met, the deductor will compute the deductee’s income after taking the deduction allowed under Chapter VI-A and the rebate under section 87A into account. Such income must have tax subtracted based on the current rates. If such a senior citizen has tax withheld from his or her income, he or she is not required to file a tax return for the prior year in which tax was withheld.
Conclusion
It’s essential to know your tax obligations as a senior citizen. You’d be entering a new financial phase and can enjoy all the exemptions from the government. The Income Tax Slab for Senior Citizens offers several deductions and benefits that allow individuals to reduce their obligations. As a Senior citizen, you should know these charges and know what you’re obliged to pay. It would help better financial planning for your future and enjoy your time.
Therefore, assess the Income Tax Slab for Senior Citizens, know what you need to pay, plan a holiday, and enjoy your retirement.
FAQs
Individual Citizens above 60 and below 80 years of age are Senior Citizens. People above 80 years of age are Super Senior Citizens.
The Senior Citizen may deduct up to 50,000 in interest income in total from their income. This clause permits a deduction for interest on both fixed deposits and savings accounts.
A senior citizen can earn Rs. 3,00,000 while a super senior citizen can earn up to Rs. 5,00,000 tax-free.
They can use ITR 1 or ITR 4 manually or electronically to file their returns.
The surcharge is calculated on your tax amount and not the income. For example, if your payable tax is Rs. 3000, a 10% surcharge would be Rs. 300.
Income tax return filing is necessary even if you earn below the exemption limit. It would also help get returns for TDS.
Bank fixed deposits having a 5-year duration are eligible for tax benefits under Section 80C of the Income Tax Act. Only senior citizens are exempt from paying taxes on interest income from fixed deposits up to Rs. 50,000.
If the senior citizen’s income is up to INR 5 lakhs, Section 87A of the Income Tax Act allows for a complete tax rebate of INR 12,500 to be applied to the tax due starting in FY 2019–20 and AY 2020–21.
The net taxable salary will be Rs. 2235900, with Rs. 5 lakh in taxes due.
Also Read: Senior Citizen Savings Scheme & Why do people pay tax?