Income Tax For Senior Citizens

Tax Exemption for Senior Citizens

As a senior citizen is a man or a woman who is 60 years of age or more or below 80 years of age as on last day of the previous year. The source of income for a senior citizen includes his rental income, interest on savings, senior citizen savings scheme, fixed deposits, post office scheme, or reverse mortgage scheme. According to the Central Board of Taxes, directive, the cases of senior citizens cannot be scrutinized unless an assessment is necessary on the credible information basis.

The exemption limit has now been increased from Rs.2,50,000 to Rs.3,00,000 for the assessment year 2015-2016. Under the Section 80D and 80 DDB of the Income Tax Act, senior citizens, can avail a deduction of up to Rs.30,000/- on the health insurance premium and a deduction upto Rs.80,000 for their medical treatment. Under the VarishthaBimaYojna, senior citizens need not pay service tax on the premium. If a senior citizen gift objects, the items that are exempted from tax. Senior citizens having public provident funds can avail an exemption up to Rs. 1,50,000/-. Short-term capital gains will be exempted from the tax if basic limit at 15% does not exceed. Under the Section 80L, senior citizens can avail tax exemptions up to Rs.12,000 per annum on the interest.

Income Tax for Senior Citizens 2015-16

The below shows the income tax slabs and rates that are applicable for senior citizens for the financial year 2015-2016

Annual Income Slabs Rates
Below Rs.3 lakh No tax rates applicable
Above Rs.3 lakh but below Rs.5 lakh 10%*
Above Rs.5 lakh but below Rs.10 lakh 20%
Above Rs.10 lakh 30%

*Rebate under Section 87A is only applicable if the income is not more than Rs.5 lakhs. A rebate of Rs. 2,000 is only applicable for those with an annual income upto Rs.5 lakh. Tax payable will, therefore, be Rs. 23,000. For those who have an income above Rs. 5 lakh, the tax payable will be Rs. 25,000 + 20% tax.

The education cess has remained unchanged at 3%. If the income exceeds Rs.1 Crores, a surcharge of 12% is payable for the financial year 2015 -2016.

Calculation of Income Tax for Senior Citizens

Income tax calculator can help you calculate the tax that you need to pay in addition to the income tax deductions that are applicable on your salary. The income tax calculator provides the total tax payable and also computes the tax from the house property. There are a number of online aggregators and financial websites that consist of the income tax calculator where you can fill in all the details such as the year of assessment, your age and annual taxable salary and you will be able to calculate the tax that you need to pay. In order to calculate your taxable salary you must have a clear picture of all the important components of your salary package such as fixed allowances, basic salary, house rent, bonus etc. You will be required to enter the above-mentioned details excluding your retirement benefits such as your PF and gratuity in the online income tax calculator. You will be required to enter the details of your TDS, details of housing property and the rent obtained through the property, etc. Some income tax websites also offer income tax calculator on Excel Sheet format for the ease of the user which can be downloaded and worked upon.

Income Tax Calculation for Senior Citizens 2017-18

The income tax calculator for the senior citizens is calculated based upon the basic salary, fixed allowances, house rent allowances, and other sources of income. However, the senior citizen would receive a higher exemption limit compared to individuals who is 60 years old. In order to calculate the income tax for senior citizen all the income is taken into consideration along with the deductions that are allowed and the income tax slab for the financial year 2017-2018. There are a number of websites that offer online income tax calculator. Once you have entire details you can make use of the calculator to determine your taxable income.

Income Tax Benefits for Senior Citizens

The senior citizens would receive superior benefits as compared to non-senior citizens. The senior citizens are entitled for a deduction of medical insurance premium up to Rs.20,000/-. The senior citizens are exempted from the payment of advanced tax. TDS is not deducted on the interest earned. As per the Section 80 DDB a higher deduction can be availed for ailment of specified diseases. The senior citizens are not required to pay tax for the amount that is received under the Reversed Mortgage Scheme.

Income Tax Filing for Senior Citizens

The senior citizens must file their income tax returns to claim their tax refund. Enlisted below are the Income Tax Return (ITR) forms that are required to be filled by senior citizens:

ITR I – Individual whose total Income Includes

  • Pension or Salary
  • Income from house or property (excluding cases where loss is shown in previous financial years)
  • Income from the other sources (excluding income from horse racing or winning lottery)

ITR 2 - Individual Whose Total Income Includes

  • Pension or Salary
  • Income from house or property
  • Capital gains
  • Income from the other sources such as winning a horse race or a lottery
  • Cases where income of another individual such as a spouse or any other member has to be combined with the income of the individual

Income Tax Slabs For Senior Citizens for Financial Year 2017 – 2018

Tax for individuals above 60 years and under 80 years of age

Annual Income Tax Rates Education Cess Secondary and Higher Education Cess
Up to Rs.3,00,000 Nil Nil Nil
Rs.3,00,001-Rs.5,00,000 5% 2% of income tax 1% of income tax
Rs.5,00,001-Rs.10,00,000 Rs.10,00 + 20% 2% of income tax 1% of income tax
Above Rs.10,00,000 Rs.1,10,000 + 30% 2% of income tax 1% of income tax

Tax for individuals over 80 years and above

Annual Income Tax Rates Education Cess Secondary and Higher Education Cess
Up to Rs.5,00,000 Nil Nil Nil
Rs.5,00,001-Rs.10,00,000 20% 2% of income tax 1% of income tax
Above Rs.10,00,000 Rs.1,12,500 Rs.1,00,000 + 30% 2% of income tax 1% of income tax

Rebate in Income Tax for Senior Citizens

  • The rebate scheme under Section 87A of the Income Tax Act is applicable for individuals whose total income is not more than Rs.5 lakhs.
  • A rebate of Rs. 2,000/- is allowed for individuals having an annual income up to Rs.5 lakhs. Therefore, the payable tax amount is Rs.23,000/-.
  • For individuals who are earning a total income above Rs.5 lakhs, the payable tax amount will be Rs.25,000 + 20% tax.

Income Tax Limit for Senior Citizens

The basic exemption limit for Senior citizens who are 60 years of age up to 80 years of age is Rs.3 lakhs. The senior citizens can avail of a number of benefits in terms of interest earned on the savings schemes. Many banks provide specialized and higher rate of interest to a senior citizen compared to the rest. The tax is deducted at source on a fixed deposit making a fixed deposit a tax free investment for senior citizens. In many cases the senior citizens can avail an exemption on the penalties or are charges a very less amount if the opt for a premature withdrawal of their fixed deposits to combat the medical emergency situations.

Income Tax for Super Senior Citizens (Above 80 Years)

A super senior citizen is the one who is more than 8 years of age. The basic exemption limit for every senior citizen is Rs. 3.50 Lakhs. The super senior citizens over 80 years of age can avail deduction up to Rs.30,000/- for the medical expenses from the total income.

The following table shows the income tax slabs and rates applicable for super senior citizens for the assessment year 2015-16 (income earned from April 1st 2014 to March 31st 2015)

Income Rates
Below Rs.5 lakh Nil
From Rs.5 lakh to Rs.10 lakh 20%*
Above Rs.10 lakh 30%