Income Tax for Senior Citizens

There are multiple ways in which a senior citizen can earn his/her income. It can either be in the form of pension, interest on savings, rental income, fixed deposits, reverse mortgage, and so on. These incomes are taxable according to the Income Tax Act.

Tax Exemption for Senior Citizens

A senior citizen is an individual resident who is 60 years old or more but below 80 years as on the last day of the previous year. Senior citizens at source of income include pension, rental income, interest on savings, fixed deposits, senior citizen saving scheme, reverse mortgage, and post office scheme.

According to a Central Board of Direct Taxes directive, cases of senior citizens cannot be scrutinised unless an assessment is necessary on the basis of credible information.

Calculation of Income Tax for Senior Citizens

Income tax calculator helps you find out how much tax must be paid in addition to the applicable deductions. Income tax calculator not only calculates your total tax but also computes income from your house property.

There are several online aggregators and financial websites which provide an income calculator wherein you can fill in all the required details such as the assessment year, age, and your annual taxable salary. To calculate your taxable salary, you should have a clear picture of all the important components of your salary package such as your basic salary, fixed allowances, house rent allowance, and bonus, if any. The aforementioned details must be entered, excluding retirement benefits such as gratuity and PF. TDS details must be entered as well.

To calculate the payable tax, you have to submit details regarding house property such as annual rental income.

Income Tax Calculation for Senior Citizens FY 2020-21

The income tax for senior citizens is calculated based on the basic salary, house rent allowance, fixed allowances, and other sources of income. However, the senior citizen receives higher exemption limit compared to individuals who are below 60 years old.

In order to calculate the income tax for a senior citizen, all the income is taken into consideration along with the allowable deductions and the income tax slab for FY 2020-21. Once you have all the details, the calculator can be used to determine your taxable income.

In the Union Budget 2020-2021, a new tax regime for taxpayers was announced by the government of India. The Government of India gives taxpayers the choice to choose between the existing tax structure or the new one when filing taxes from FY2020-21 onwards.

Under this new tax regime, there is no higher tax exemption limit for senior citizens (between the age of 60 and 80) or for super senior citizens (above the age of 80).

Given below are the various tables for the Income Tax Slabs for the FY 2020-2021 under the old tax regime:

Senior Citizens Income Tax Slabs FY 2020-2021

Tax applicable for individuals over 60 years and under 80 years

Income tax slabs Rate of tax Health and education cess
Up to Rs.3 lakh No tax NA
Rs.3 lakh - Rs.5 lakh 5% 4% of income tax
Rs.5 lakh - Rs.10 lakh 20% 4% of income tax
Above Rs.10 lakh 30% 4% of income tax
  • Income tax exemption limit is up to Rs.3 lakh.
  • Surcharge is applicable if total income is more than Rs.50 lakh and up to Rs.1 crore: 10% of income tax.
  • Surcharge is applicable if total income exceeds Rs.1 crore: 15% of income tax.

Super senior citizens Income tax slabs (more than 80 years of age) for FY 2020-2021

Income tax slabs Rate of tax Health and education cess
Up to Rs.5 lakh No tax NA
Rs.5 lakh - Rs.10 lakh 20% 4% of income tax
Above Rs.10 lakh 30% 4% of income tax
  • Income tax exemption limit is up to Rs.5 lakh.
  • Surcharge is applicable if total income is more than Rs.50 lakh and up to Rs.1 crore: 10% of income tax.
  • Surcharge is applicable if total income exceeds Rs.1 crore: 15% of income tax.

Income Tax Filing for Senior Citizens

The senior citizens are required to file the income tax return to claim their tax refund. The following Income Tax Return (ITR) forms are required to be filled by the senior citizens:

ITR I – Individual whose total Income Includes:

  • Salary or pension
  • Income from house or property (excluding incidents where loss is brought forward from previous financial years)
  • Income from the other sources (excluding income from horse racing or winning lottery)

ITR 2 - Individual whose total Income Includes:

  • Salary or pension
  • Income from house or property
  • Capital gains
  • Income from the other sources (includes winning from horse racing and lottery)
  • Incidents where the income of another individual, such as spouse or other member has to be combined with the income of the individual

Union Budget 2020-21 Deductions for Senior Citizens

  • Health insurance: Deductions of up to Rs.50,000 per annum can be claimed by senior citizens towards their health insurance premium and/or medical expenses under Section 80D. In the case of dependent seniors, a deduction of up to Rs.1 lakh can be claimed for critical illnesses that have been specified previously. This falls under Section 80DDB.
  • Pension: For pensions there is a standard deduction of Rs.50,000. This is for pensions in the form of annuity payments which are taxable just like the salaried income. It falls under Section 80D.

Income Tax Benefits for Senior Citizens

  • Interest income:Senior citizens (Indian residents) do not have to pay tax in case they are earning an interest of up to Rs.50,000 in a financial year. The benefit is provided under Section 80TTA. Form 15H must be submitted when the ITR is filed.

Over and above that, there is a deduction of up to Rs.50,000 on the interest from post office deposits and fixed deposits. Banks will take Tax Deducted at Source (TDS) from the interest income of such sources only if it is more than Rs.50,000 for the financial year. For total income that is below the tax exemption limit, Form 15H can be submitted to the bank requesting that TDS is not deducted from that financial year. This interest exemption falls under Section 80TTB.

  • Advance tax: Senior citizens do not have to pay advance tax during the year as they do not have business income. They only have to pay the Self-Assessment (SA) Tax which is done after calculation of the final tax liability for the financial year.
  • Reverse mortgage: Senior citizens get special benefits under the reverse mortgage scheme. Under this scheme, their property value can be monetised to get EMIs in return which can supplement their income. This monthly amount that is received by senior citizens is exempt from tax on the side of the senior citizen.

FAQs On Income Tax for Senior Citizen's

    1. Who is considered as a senior citizen?

    Individuals who are above 60 years of age but under 80 years of age are considered as senior citizens for accounting purposes.

    2. Who is considered as a super senior citizen?

    Individuals who are above 80 years of age are considered as super senior citizens

    3. What are the tax rates applicable to senior citizens and super senior citizens?

    There is a minor difference between the tax rates applicable to senior citizens and super senior citizens. While the minimum exemption limit for those who fall in the senior citizens category is Rs.3 lakh, those who qualify as super senior citizens are exempt from tax if their income is under Rs.5 lakh. Apart from this, the slabs remain the same for both groups of taxpayers.

    4. Are there any benefits for senior citizens?

    Senior citizens, apart from making the most of a higher exemption limit, can also claim tax benefits under Section 80C, Section 80D and Section 80DDB of the Income Tax Act.

    5. Which form must I use to file my income tax returns?

    If you earn a salary or pension income, or income from your residential property, or income from other sources, you will have to use ITR-1. In case your income includes salary or income from pension, or income from residential property, or income from short/long term capital gains, or income from other sources, you will have to use ITR 2.

News About Income Tax Senior citizens

  • Senior citizens need not file IT returns on fulfilling certain conditions

    Senior citizens aged 75 years and above will not be required to file income tax returns provided they fulfil certain conditions, as per a notification by The Income Tax department.

    A provision had been introduced by the Central government in its 2021-22 Budget to exempt senior citizens of 75 years and above who have pension income and earn interest from fixed deposit in the same bank from filing income tax returns for the financial year beginning 1 April.

    The Central Board of Direct Taxes (CBDT) announced senior citizens will have to file income tax returns with the specified bank who in turn will deduct tax on pension and interest income and deposit with the government.

    It is important to note that the exemption from the income tax filing will be available only if the interest income is earned in the same bank where pension is deposited.

    The senior citizens will now be required to declared their income in Form 12BBA instead of going through the ordeal of filing their income tax returns.

    13 September 2021

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