A senior or super senior who earns more than the exemption amount is still required to pay taxes even though they are not required to file an income tax return (ITR). The exemption does not cover the actual tax liability; it only applies to filing the return.
Also Read: I-T Dept Issues Reminder: Link PAN with Aadhaar by May 31 to avoid higher TDS; here’s how
Together with income from other sources, the pension income is primarily responsible for taxes. But take note that government commuted pension income—that is, income that is immediately payable in a lump sum—is completely exempt from all taxes. Uncommuted pension income is subject to the relevant marginal slab rates and is taxable under the “Salaries” heading.
The taxation of commuted pension income from private businesses falls under the “Salaries” category, and the relevant tax rates apply.
Investments in tax savings made by March 31, 2024, will be included in income tax returns for the 2023–2024 fiscal year. Benefits like Section 80C for interest income and health insurance premiums are eliminated under the new tax law. There are still benefits from the previous regime in many areas.
Senior citizens looking to pay off their tax liabilities first focus on their income sources. Take into account all of your income sources, including your salary, pension, fixed deposit income, interest from savings accounts, rent from rental properties, capital gains from investments, and so forth.
Also Read: Income Tax: Filing ITR early this time? Here are 8 key strategies to optimise tax savings
Suppose an individual’s total income is less than a certain threshold ( ₹5 lakhs in the previous tax regime and ₹7 lakhs in the current tax regime). In that case, they are also eligible for a tax rebate under Section 87A of the Income Tax Act. The rebate would equal ₹12,500 (or, in the event of a new tax regime, ₹25,000), less the actual tax amount.
Senior citizens have higher deduction limits and exemption benefits than younger taxpayers. The primary difference lies in the basic exemption ceiling, which denotes the maximum amount that is exempt from taxes. For instance, the maximum for older adults (60–80 years old) is currently ₹3 lakh, while the maximum for younger adults ( ₹2.5 lakh) is ₹2.5 lakh.
Their taxable income is directly decreased by this higher exemption level. The total income less the exemption cap and any relevant deductions is the taxable income. A greater exemption level means that a greater portion of their income is not subject to taxes.
Also Read: National Pension System: 7 strategic insights for tax-efficient retirement saving
Similarly, there are more possible deductions.
Seniors’ taxable income is calculated by taking their total income and subtracting any applicable exemptions and deductions. This yields their taxable income. Below is a summary of the process:
Step 1: Calculate the total income. This includes any income the senior citizen receives from sources like:
Step 2: Benefit from available deductions. Many deductions are available to senior citizens under various sections of the Income Tax Act. Several typical ones are:
Step 3: Compared to younger taxpayers, senior citizens enjoy a higher basic exemption level.
Step 4: Calculate your taxable income.
It is taxable income if the remaining sum after deductions is greater than the exemption threshold.
Taxable Income = Total Income – Deductions – Exemption Limit |
Essentially, seniors’ taxable income is reduced by a combination of higher exemption limits and additional deductions. This means they may be able to keep more of their retirement income and pay less in taxes overall.
Also Read: ITR Filing FY24: 6 key points taxpayers must know as July 31 deadline looms large
Next, there is the cessation of health education and the surcharge. To determine the final tax liability, the applicable surcharge (if any) and the 4% health and education cess would be subtracted. The tax liability amount would be increased by any interest consequences, penalties, or late filing fees that may arise.
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Published: 30 May 2024, 09:33 AM IST
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