Income Tax for Senior Citizens FY 2019-20 AY 2020-21


(Last Updated On: May 27, 2019)

 

Income tax is payable if any individual earns an income in a financial year. The tax rate depends on the aggregate income which the individual has earned under the following heads –

  • Income from Salary
  • Income from House Property
  • Income from Capital Gains
  • Income from Business or Profession
  • Income from Other Sources

All the five heads of income are added together to arrive at the total income which is subject to income tax. There is a tax slab based on which the income calculated aggregating the five heads is calculated. The tax slabs are different for different tax-payers. If you are a senior citizen, your tax liability would be calculated differently because the tax slabs and the tax-saving provisions are different for senior citizens. Let’s understand how –


Who are senior citizens?

For the income tax purposes Individuals who are aged 60 years and above but below 80 years are called senior citizens. Further, Individuals who are aged 80 years and above are called super senior citizens.


Sources of income for senior citizens

Senior citizens usually earn incomes from the following sources –

  • Pension
  • Interest on savings account or fixed deposit schemes
  • Rental income from renting out a house property
  • Senior citizen saving schemes
  • Reverse mortgage schemes
  • Post office deposit schemes which also pay an interest

Tax slabs for senior citizens and super senior citizens

The tax slabs for senior citizens and super senior citizens are different than the tax slabs for normal individuals as the tax exemption limits are higher for senior citizens. Here are the applicable slabs for FY 2019-20 ; AY 2020-21 –

  • For senior citizens aged between 60 and 80 years

Income level

Applicable tax

Up to INR 300,000

Nil

INR 300,001 to INR 500,000

5% of the income exceeding INR 300,000

INR 500,001 to INR 10,00,000

5% of the income exceeding INR 300,000

+

20% of the income exceeding INR 500,000

INR 10,00,001 and above

5% of the income exceeding INR 300,000

+

20% of the income exceeding INR 500,000

+

30% of the income exceeding INR 10,00,000


  • For super senior citizens

Income level

Applicable tax

Up to INR 500,000

Nil

INR 500,001 to INR 10,00,000

20% of the income exceeding INR 500,000

INR 10,00,001 and above

20% of the income exceeding INR 500,000

+

30% of the income exceeding INR 10,00,000


Moreover, under Section 87A of the Income Tax Act, if the income of the senior citizen is up to INR 5 lakhs, a full tax rebate of INR 12,500 would be applicable on the tax liability from FY 2019-20 ; AY 2020-21. This means that for individuals earning incomes of up to INR 5 lakhs in a financial year, no tax amount would be payable.

If the income is more than INR 50 lakhs but below INR 1 crore, a surcharge of 10% of the tax calculated would have to be paid. For incomes exceeding INR 1 crore, the surcharge payable would be 15% of the tax liability calculated. Besides the surcharge, health and education cess of 4% of the tax liability would also be payable on the tax calculated.


Calculation of tax for senior citizens

To calculate the tax liability of senior citizens, their income from all the sources is added together. This gives the aggregate taxable income. Thereafter, there are various deductions and exemptions which are available to senior citizens to lower their tax liability. These deductions and exemptions include the following –

  • Deduction under Section 80C

This section allows senior citizens deductions of up to INR 1.5 lakhs from their taxable income for eligible investments and expenses. The list of popular investments which are exempt under Section 80C include the following –

  • 5 year fixed deposits
  • Investment in Equity Linked Savings Scheme (ELSS)
  • Investment in Public Provident Fund (PPF)
  • Life insurance premiums (LIP) paid
  • Investment in Senior Citizen Saving Scheme (SCSS) or
  • National Saving Certificates etc.

  • Deduction under Section 80CCC

If you pay premiums towards a life insurance pension plan, such premiums paid would be allowed as a deduction under this section. The maximum limit is INR 1.5 lakhs including the deduction available under Section 80C.

  • Deduction under Section 80CCD

Under this section, investments done towards the National Pension Scheme are allowed as a deduction up to a maximum of INR 50,000. This deduction is over and above the total deduction available under Section 80C and Section 80CCC. Senior citizens can invest in the National Pension Scheme up to 65 years of age.

  • Deduction under Section 80D

Health insurance premiums paid for availing health insurance coverage for senior citizens is allowed as a deduction under this section up to a maximum of INR 50,000

  • Deduction under Section 80DD

If the senior citizen incurs expenses for the treatment or maintenance of a disabled family member, deduction can be claimed under this section for such expenses. The limit of deduction allowed is fixed and depends on the disability suffered by the family member. If the disability suffered is more than 40% but below 80%, a fixed deduction of INR 75,000 is allowed. For higher disabilities, the deduction limit increases to INR 1.25 lakhs

  • Deduction under Section 80DDB

Expenses incurred for treating specific illnesses are covered under this section. If senior citizens suffer from pre-specified illnesses, they can claim a deduction of expenses incurred on treating such illnesses. From FY 2018-19 the limit of deduction would be the actual costs incurred up to a maximum of INR 1 lakh.

  • Deduction under Section 80G

If senior citizens donate to specified charitable causes and institutions, they can claim a deduction for the donation made. Deduction is allowed either at 50% of the donated amount or 100% of the donated amount depending on the charity chosen.

  • Deduction under Section 80GGC

If senior citizens contribute money to a political party, the contribution would be allowed as a deduction under Section 80GGC.

  • Deduction under Section 80RRB

If a senior citizen has a registered patent and earns royalty incomes on such patents, the royalty received is allowed as a deduction from taxable income. The maximum amount of royalty which would be allowed as a deduction would be limited to INR 3 lakhs. Moreover, to claim the deduction, the following conditions should be fulfilled by the senior citizen –

  • He or she should be an Indian resident
  • He or she should have registered the patent on or after 1st April 2003 under the Patents Act 1970
  • To claim the deduction the senior citizen would have to submit to the tax authorities and the certificate should be signed by the prescribed authorities
  • The senior citizen should be the patentee

  • Deduction under Section 80TTB

If the senior citizen has made deposits in a bank or post office, the interest earned on such deposits, including interest from savings account, fixed deposit schemes and post office deposit schemes would be allowed as a tax-free income in the hands of the senior citizen. Deduction on interest income earned would be limited to INR 50,000 form FY 2018-19.

  • Deduction under Section 80U

The Deduction under Section 80U is available to senior citizens who suffer from a disability or mental retardation. This deduction amount is fixed at INR 75,000 which increases to INR 1.25 lakhs if the senior citizen has severe disabilities.

Besides the various deductions available under Chapter VI A of the Income Tax Act, the income earned by senior citizens on reverse mortgage scheme is not taxable. Under the scheme of reverse mortgage, the senior citizen can avail EMIs for the value of a property belonging to him by mortgaging the property. The EMI payments continue throughout the lifetime of the senior citizen and provide a source of regular income. When the senior citizen dies, the house property is sold to realise the loan.

Moreover, senior citizens are also not required to pay any advance tax on their incomes. They file their returns through self-assessment tax after the completion of the financial year.

After the income is aggregated and the eligible deductions are deducted from the income, the taxable income of the individual is ascertained. This taxable income is, then, subject to tax as per the applicable tax slab.


Filing of income tax for senior citizens

Income tax is required to be filed by senior citizens if they have any income during the financial year. Even if the income is not taxable, the tax return should be filed for claiming a tax refund or for evidence of income earned during a financial year. To file an income tax return, senior citizens would have to use the following income tax forms depending on their income –

  • ITR – 1

If the income of the senior citizen includes the following then tax return should be filed in ITR – 1

  • Income from house property like rental income
  • Income from other sources like dividends earned, interest income, etc.
  • The Income from salary or pension
  • ITR – 2

ITR – 2 would be required to be filled if the income of the senior citizen arises from  the following sources –

  • Income from house property like rental income
  • Income from other sources like dividends earned, interest income, etc.
  • The Income from salary or pension
  • Income from Capital gains
  • If the income of another earning member (like spouse) is combined with the income of the senior citizen

Frequently Asked Questions (FAQs)


  • Are different deductions available for senior citizens and super senior citizens?

No, though the tax slabs are different, the same deductions are available to senior citizens and super senior citizens.

  • Can senior citizens file their taxes online?

Yes, the online facility of tax filing is available for senior citizens too.

  • If the taxable income of senior citizens is below the exemption limit, is tax filing necessary?

Yes, tax filing is necessary if the senior citizen earns an income in a financial year even though the income is below the taxable limit. If TDS has been deducted from any income of the senior citizen, through tax filing, the tax payer can avail a refund of such TDS.

  • Is TDS deducted from the interest income of senior citizens?

No, in case of senior citizens, TDS is not deducted from the interest income earned from bank savings accounts, fixed deposits and deposits in post offices.

  • Which income is considered for rebate, taxable income or total income?

For the applicable rebate on tax, taxable income is considered. The deductions are deducted from the total income and if the taxable income is below INR 5 lakhs, full tax rebate would be allowed and the senior citizen would have to pay no tax on his income from the FY 2019-20.

Author


Team Tax2Win