The Income Tax Act, 1961, levies a tax on every individual who earns an annual income over the tax-exempt limit, at a prescribed rate. In this regard, a senior citizen’s earnings can exist in the form of pension, interest on savings, fixed deposits, rental income, reverse mortgage, etc. According to the ITA, these sources of earning are taxable under income tax for senior citizens.
According to the law, a senior citizen is any person who is 60 to 80 years of age and is a citizen of India. A resident individual aged between 60-80 years with an annual income of over Rs. 3,00,000 is liable to pay the prescribed tax amount.
A super senior citizen is an individual who is over 80 years of age. The Income Tax Act levies a tax on the income of a super senior citizen if his/her annual income exceeds Rs. 5,00,000.
The government introduced the senior citizen tax slab in 2022, which is optional and co-exists with the tax slab previously in place. This new concessional income tax regime with reduced tax rates, thus, is an alternative for those taxpayers who are willing to forego the existing tax exemptions and deductions in place.
As per the current income tax slab, taxation on the income of senior citizens is as follows:
| Income range | Rate of income tax | Health and education cess |
| Up to Rs. 3,00,000 | Nil | Nil |
| Over Rs. 3,00,000 and below Rs. 5,00,000 | 5% of total income minus Rs. 3,00,000 | 4% |
| Over Rs. 5,00,000 and below Rs. 10,00,000 | (20% of total income minus Rs. 5,00,000) + Rs. 10,000 | 4% |
| Above Rs. 10,00,000 | (30% of total income minus Rs. 10,00,000) + Rs. 1,10,000 | 4% |
Additionally, senior citizens are subjected to a surcharge based on their payable income tax, which is applicable as follows –
The pre-existing income tax slab for senior citizens is summarised below:
| Income range | Rate of income tax | Secondary and Higher Education Cess | Education Cess |
| Up to Rs. 3,00,000 | Nil | Nil | Nil |
| Over Rs. 3,00,000 and below Rs. 5,00,000 | 10% of total earnings minus Rs. 3,00,000 | 1% of income tax | 2% of income tax |
| Over Rs. 5,00,000 and below Rs. 10,00,000 | (20% of total earnings minus Rs. 5,00,000) + Rs. 20,000 | 1% of income tax | 2% of income tax |
| Above Rs. 10,00,000 | (30% of total earnings minus Rs. 10,00,000) + Rs. 1,20,000 | 1% of income tax | 2% of income tax |
Here, 12% of income tax computed is payable as a surcharge when the net income stands over Rs. 1 crore.
As per the current income tax slab, taxation on the income of super senior citizens is as follows:
| Income range | Rate of income tax | Health and education cess |
| Up to Rs. 5,00,000 | Nil | Nil |
| Over Rs. 5,00,000 and below Rs. 10,00,000 | 20% of total earnings minus Rs. 5,00,000 | 4% |
| Above Rs. 10,00,000 | (30% of total earnings minus Rs. 10,00,000) + Rs. 1,00,000 | 4% |
Super senior citizens are subjected to a surcharge based on their payable income tax as follows:
The above income tax slab for super senior citizens exists alongside the previous tax slab, which is summarised below:
| Income range | Rate of income tax | Secondary and Higher Education Cess | Education Cess |
| Up to Rs. 5,00,000 | Nil | Nil | Nil |
| Over Rs. 5,00,000 and below Rs. 10,00,000 | 20% of total earnings minus Rs. 5,00,000 | 1% of tax | 2% of tax |
| Above Rs. 10,00,000 | 30% of total earnings minus Rs. 10,00,000 + Rs. 1,00,000 | 1% of tax | 2% of tax |
The Income Tax Act offers several deductions and benefits on income tax for senior citizens, which includes the following:
Exemption limit refers to the threshold of income up to which an individual is not liable to pay any tax. The basic tax exemption for non-senior citizens in India is Rs. 2,50,000. On the other hand, senior citizens enjoy a higher exemption limit of up to Rs. 3,00,000. Therefore, a senior citizen need not pay any tax, file an ITR or face TDS deduction if his/her annual income is up to the prescribed limit.
Under Section 80TTA, individuals below 60 years of age may claim a standard deduction for senior citizens up to Rs. 10,000 as interest on Savings Bank Account(s). Section 80TTB allows senior citizens to claim a deduction of up to Rs. 50,000 on bank/post office as well as on interest on Savings Bank Account(s).
For senior citizens, the deduction limit on payment of health insurance premium is Rs. 50,000, under Section 80D of the Income Tax Act. This deduction available to other citizens is Rs. 25,000.
Income tax rebate for senior citizens FY 2021-22, who receive a pension from their former employees can claim a deduction up to Rs. 40,000 against such salary income.
Under Section 80DDB, an individual up to 60 years of age may claim a deduction up to Rs. 40,000 on medical treatment of specified diseases or ailments. This limit is Rs. 1,00,000 for senior citizens.
As per Section 208, any individual whose estimated tax liability for a given income year is Rs. 10,000 or more, is liable to pay an advance tax. Senior citizens need not pay this tax unless they earn under the head of ‘Profits and Gains from Business or Profession’.
The government recognises the significance of easing out the financial burden on pensioners. The law, therefore, proffers special income tax benefits for senior citizens, which alleviates their financial burden.