ITR Filing For Senior Citizens: How To Calculate Taxable Income And Maximise Deductions

Filing income tax returns (ITR) for senior citizens in India involves specific considerations and benefits tailored to their needs. Senior citizens, defined as individuals aged 60 and above, and super senior citizens, aged 80 and above, enjoy various exemptions and lower tax rates. “Section 194P of the Income-tax Act, 1961, was introduced in Budget 2021 to provide conditional relief to senior citizens above 75 from filing income tax returns. Section 139 governs the filing of income tax returns by every individual with income above the basic exemption limit,” informs Manikandan S., tax expert, ClearTax, an online ITR filing platform. First, let’s understand how taxable income is calculated for senior citizens:

Step-by-Step Calculation of Taxable Income

1. Identifying Total Income Sources

Senior citizens typically have diverse income sources, including pensions, interest from savings accounts, fixed deposits (FDs), rental income, and other investments. Each income source needs to be identified and summed up to determine the total gross income. - Pension: Treated as salary income and fully taxable. - Interest Income: Interest from savings accounts and fixed deposit schemes are exempt under Section 80TTA. Additionally, for senior citizens, interest from deposits with banks, post offices, and cooperative societies up to Rs 50,000 is exempt under Section 80TTB. - Rental Income: Rental income from property is taxable after a standard deduction on the net annual value. - Capital Gains: Income from the sale of assets such as property or stocks is taxed under capital gains. ALSO READ: ITR Filing: When Can Senior Citizens Stop Filing Income Tax Returns? “A senior citizen must submit a declaration using Form No. 12BBA. Once the older citizen has filed the declaration, the bank will compute the gross total income (pension plus interest income). To calculate net taxable income, the bank will also consider the deductions, tax exemptions, and rebates available to elderly citizens under Section 87A. After deductions and rebates, the bank would now deduct TDS for older persons,” states Manikandan. The bank will request proof of deductions and tax exemptions to which the senior person is entitled when filing the declaration. “If they choose the previous income tax regime, this will be required. If the older citizen chooses the new income tax regime, no investment proof will be required,” he informs. ALSO READ: ITR Filing: Things Senior Citizens Should Know Before Submitting Income Tax Returns

Claiming Deductions

Senior citizens can claim various deductions under the Income Tax Act to reduce their taxable income. Standard Deduction: A standard deduction of Rs 50,000 is available for pension income. Section 80C: Deductions up to Rs 1.5 lakh for investments in specified instruments like Public Provident Fund (PPF), National Savings Certificate (NSC), life insurance premiums, etc. Section 80D: Medical insurance premiums up to Rs 50,000 are deductible under the old tax regime. For super senior citizens, medical expenditure up to Rs 50,000 can also be claimed if no health insurance is purchased. Section 80DD and 80DDB: Deductions for medical treatment of specified diseases and disabilities. Section 80G: Deductions for donations to specified funds and charitable institutions. Calculating Gross Total Income: The gross total income is calculated by summing up all income sources and then deducting the eligible exemptions and deductions. ALSO READ: Understanding DTAA: How NRIs Can Avoid Double Taxation In India

Tax Slabs For Senior And Super Senior Citizens (as per the old tax regime)

The taxable income is computed by deducting the eligible deductions from the gross total income. The applicable tax rates for senior and super senior citizens are then applied to the taxable income.

For Senior Citizens (60-79 years):

- Up to Rs 3 lakh: No tax - Rs 3 lakh to Rs 5 lakh: 5 per cent - Rs 5 lakh to Rs 10 lakh: Rs 10,000 + 20 per cent of income over Rs 5 lakh - Above Rs 10 lakh: Rs 1.1 lakh + 30 per cent of income over Rs 10 lakh

For Super Senior Citizens (80 years and above):

- Up to Rs 5 lakh: No tax - Rs 5 lakh to Rs 10 lakh: 20 per cent - Above Rs 10 lakh: Rs 1 lakh + 30 per cent of income over Rs 10 lakh ALSO READ: How Is Tax Evasion Different From Tax Avoidance? Know The Consequences Filing an ITR as a senior citizen in India can be a straightforward process if all income sources and deductions are carefully considered. With the specific exemptions and lower tax rates available, senior citizens can effectively reduce their tax liability and ensure compliance with tax laws.