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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.

Senior Citizen Age for Income Tax

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.

Income Tax Slabs for Senior Citizens

The government introduced the senior citizen tax slab in 2020, 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 –

  • If the total income is more than Rs. 50 lakhs and up to Rs. 1 crore, surcharge at a rate of 10% of income tax is levied.
  • If the total income exceeds Rs. 1 crore, 15% of income tax is levied as a surcharge.

The pre-existing income tax slab for senior citizen 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.

Income Tax Slab for Super Senior Citizen

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:

  • If the total income is more than Rs. 50 lakhs and up to Rs. 1 crore, surcharge at a rate of 10% of income tax is levied.
  • If the total income exceeds Rs. 1 crore, 15% of tax is applicable as a surcharge.

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

Income Tax Benefits for Senior Citizens

The Income Tax Act offers several deductions and benefits on income tax for senior citizens, which includes the following:

  • Higher exemption limit

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.

  • Deduction on interest income

Under Section 80TTA, individuals below 60 years of age may claim deduction up to Rs. 10,000 as interest on Savings Bank Account(s). Section 80TTB allows senior citizens to claim deduction up to Rs. 50,000 on bank/post office as well as on interest on Savings Bank Account(s).

  • Deduction for the premium paid for medical insurance

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.

  • Benefit of standard deduction

From AY 2019-20, senior citizens who receive pension from their former employees can claim a deduction up to Rs. 40,000 against such salary income.

  • Deduction pertaining to medical expenses for treatment of specified disease or ailment 

Under Section 80DDB, an individual up to 60 years of age may claim deduction up to Rs. 40,000 on medical treatment of specified diseases or ailments. This limit is Rs. 1,00,000 for senior citizens.

  • Exemption from paying advance tax

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.

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