The Income Tax Act, 1961, defines different tax rates for individual taxpayers basis their age and income. Under the old tax regime, there are different tax slabs for different age group. Individuals aged 60 years or above are considered senior citizens and accordingly they fall under specified tax slab. Moreover, the tax provisions also have different rules for senior citizens when it comes to tax-saving avenues and investments. So, here are some common tax-related FAQs that senior citizens might have while filing their Income Tax returns along with their answers.
Tax-related FAQs for senior citizens
1. What is the difference between a senior citizen and a super senior citizen?
As per income tax rules, a senior citizen is one who is aged between 60 and 80 years1. On the other hand, a super senior citizen is one who is aged 80 years and above1.
2. What are the tax slabs for senior and super senior citizens?
Under the old tax regime of the act, there are different tax slab for senior and super senior citizens2. However, under the new tax regime, there is a uniform tax slab2 irrespective of the age group. The tax slabs will be as follows –
Under the Old Tax Regime, for senior citizens2
| Taxable income | Rate of tax |
|---|---|
Up to Rs.3,00,000 |
Nil |
Rs.3,00,000 to Rs.5,00,000 |
5%(tax rebate u/s 87A is available) |
Rs.5,00,000 to Rs.10,00,000 |
20% |
Rs.10,00,000 and above |
30% |
Under the Old Tax Regime, for super senior citizens2
| Taxable income | Rate of tax |
|---|---|
| Up to Rs.5,00,000 | Nil |
| Rs.5,00,000 to Rs.10,00,000 | 20% |
| Rs.10,00,000 and above | 30% |
Under the New Tax Regime for FY 2022-23:
The tax slabs are as follows2 for both senior and super senior citizens are same as follows–
| Taxable income | Rate of tax |
|---|---|
Up to Rs.2,50,000 |
Nil |
Rs.2,50,000 to Rs.5,00,000 |
5% |
Rs.5,00,000 to Rs.7,50,000 |
10% |
Rs.7,50,000 to Rs.10,00,000 |
15% |
Rs.10,00,000 to Rs.12,50,000 |
20% |
Rs.12,50,000 to Rs.15,00,000 |
25% |
Rs.15,00,000 and above |
30% |
However, the new tax regime was modified in the Union Budget 2023$. The modifications are as follows –
- The minimum threshold limit for tax has been increased to Rs.3 lakhs from the existing Rs.2.5 lakhs.
- The limit to claim a rebate on income tax has been increased. Taxable income up to Rs.7 lakhs will attract no tax. Earlier, it was Rs.5 lakhs.
- The new regime has been made default unless chosen otherwise.
- The new changes will be effective from the financial year 2023-24.
The changed slabs per the new regime are as follows –
| Income | Tax rate |
|---|---|
| Up to Rs.3,00,000 | Nil |
| Rs.3,00,000 to Rs.6,00,000 | 5% |
| Rs.6,00,000 to Rs.9,00,000 | 10% |
| Rs.9,00,000 to Rs.12,00,000 | 15% |
| Rs.12,00,001 to Rs.15,00,000 | 20% |
| Rs.15,00,000 and above | 30% |
Senior citizens can choose from the old or the new regime depending on which regime is tax efficient.
3. What are the tax-saving insurance cum investment avenues for senior citizens?
Senior citizens may invest in the different types of life insurance plans available in the market. Some of the plans that they can choose are as follows:
• Endowment plans
Endowment plans allow senior citizens to create a secured corpus which is not exposed to the volatility risks of the market. Some plans might also offer bonus or loyalty additions, subject to policy terms & conditions and product features, that can boost the corpus.
• Money-back plans
Money-back plans are like endowment plans that help in creating a secured corpus. However, these plans offer liquidity. Senior citizens can get periodic money-back benefits from the plans for their financial needs.
• Retirement Plans
Retirement-oriented life insurance policies can help senior citizens plan for their retirement. Senior citizens can choose from two types of retirements plans –
• Deferred pension plans -
A deferred annuity plan refers to an investment plan where the pension does not start immediately. Instead, you can choose to start the pension at a later date, after a few years. In this type of plan, you can accumulate the retirement fund for the long-term by paying premium(s) in lump sum or systematically, on a monthly, quarterly, half-yearly or yearly basis. These plans allow individuals to accumulate a corpus and secure pension payments.
• Immediate/ Deferred annuity plans –
In an immediate annuity plan, the insurance company agrees to pay the pension immediately (i.e. starting next month/quarter/half-yearly/yearly as opted for) on investing a lump sum amount.
Life insurance plans have tax-saving benefits that can help senior citizens in planning their taxes. Premiums paid for life insurance policies, qualify as a deduction under Section 80C3 subject to conditions specified therein. Overall deduction u/s 80C along with deduction u/s 80CCC & 80CCD allowed is up to Rs. 1,50,000. The death benefit or the maturity benefit also qualifies for tax exemption under Section 10(10D)4, subject to satisfaction of conditions mentioned therein. The premium paid for pension plan also qualifies for a deduction under Section 80CCC5. Moreover, in the case of deferred annuity plans, senior citizens get an option to commute6 a part of the accumulated corpus and get it in a lump sum. This commuted pension is also tax-free6.
So, with life insurance plans, senior citizens can enjoy insurance protection and also create savings while enjoying tax benefits.
4. Are there other reliefs that senior citizens can claim under income tax?
Yes, there are other tax-related reliefs offered to senior citizens. Some of them are as follows:
- Senior citizens that do not earn income from business or profession are exempted from paying advance tax under Section 2077.
- TDS is not deducted from deposit income earned by senior citizens provided the interest income is up to Rs. 50,000 u/s 80TTB7.
- No tax is deducted from payment of interest by bank for senior citizen up to Rs. 50,000 u/s 194A.
Conclusion
So, if you are a senior citizen or if you want to help your parents or other senior citizens with tax planning, understand the income tax provisions for senior citizens. Know the tax slabs and tax-saving options available to senior citizens.
Reference
1. https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-2#:~:text=An%20individual%20resident%20who%20is,Citizen%20for%20Income%20Tax%20purposes.
2. https://cleartax.in/s/income-tax-slabs
3. https://incometaxindia.gov.in/tutorials/20.%20tax%20benefits%20due%20to%20health%20insurance.pdf
4. https://taxguru.in/income-tax/section-10-10d-exemption-amount-received-life-insurance-policy.html
5. https://cleartax.in/s/section-80ccc#:~:text=Section%2080CCC%20of%20the%20Income,the%20limit%20of%20section%2080C.
6. https://taxguru.in/income-tax/exemption-commuted-pension-section-10-10a.html
7. https://incometaxindia.gov.in/pages/faqs.aspx
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