Tax Planning for Senior Citizens F.Y.2022-23 A.Y.2023-24: The category of senior citizens has been under the purview of income tax for a very long time. However, there have been certain relief that has been provided to them when it comes to imposing taxes on their income. A person is regarded as a senior citizen if the person is above the age of 60 years. Some of the tax planning tips for senior citizens is as follows:
Who is Senior Citizen
A Senior Citizen is an individual who has reached the age of 60 during the previous year.
For Example: In other words, you can say that if you have completed the age of 60 years and you will be treated as Senior Citizen as per the Income Tax Act.
Who is Very Senior Citizen
A Very Senior Citizen is an individual who has reached the age of 80 years during the previous year.
A tax rebate can be claimed by senior citizens whose income is up to Rs. 5 lakh. This rebate is equal to the amount of tax or Rs. 12,500/- whichever is less.
Advance tax Exemption
In the event that a senior citizen does not have any income from a business or profession, they shall not be entitled to pay any advance taxes. There is no need for them to pay any kind of advance tax. Therefore, they are not liable for penal interest if they do not pay advance tax. Please read more detail about Advance Tax Payment here.
Pensioners Senior Citizen Exempt to File Income Tax Return
Senior citizens who are 75 years of age or older do not need to file income tax returns if they meet the following criteria.
- The only source of income is pensions and pension interest
- Those who make a bank declaration in form 12BBA to that effect
- Under section 194P, the bank has deducted TDS from their income
Basic Exemption Limit
The IT Department of India has increased the exemption limit for senior citizens. Now people who fall under this category can claim a basic exemption of INR 3, 00, 000 on their total income for a particular AY. In case, the age of a taxpayer has reached 80 years, the same exemption limit increases to INR 5, 00, 000.
It is therefore advisable to invest in schemes where the income generated is taxable in a manner that does not exceed the basic exemption limit (Rs. 3 lakh in the case of senior citizens 60 years of age or older, but not exceeding 80 years of age, and Rs. 5 lakh in the case of very senior citizens 80 years of age or older).
Senior citizens (60 years or above) not having any income from business or profession shall not be liable to pay advance tax.
For more information go to: Computation of taxable Income and tax payable for individuals
- Investments: Deduction in respect of life insurance premium, provident funds, repayment of housing loan etc. up to a maximum of Rs.1,50,000/-[Sec. 80C].
- Additional deduction of Rs. 50,000 (maximum) for contribution to notified Pension Scheme.
- Investment in health policies: Just like the benefits which accrue to ordinary residents, even senior citizens are entitled to receive a deduction of Rs. 50, 000 (only for senior citizens). When they invest in medical policies under the section 80D. Check complete detail about deduction under section 80D (mediclaim)
On an Income of Rs.8,00,000 senior citizens is not liable to pay tax planning.
Yes, it is true, if you are a senior citizen then you don’t need to pay tax on income up to Rs.8,00,000 for A.Y.2023-24. But it is possible only by proper tax planning.
|Gross Total Income||8,00,000|
|Less: Deduction under section 80C, 80CCC and 80CCD(1)||1,50,000|
|Less: Deduction under section 80CCD(1B)||50,000|
|Less: Deduction under section 80D||50,000|
|Less: Deduction under section 80TTB||50,000|
|Less: Rebate under section 87A||10,000|
|Net Tax Payable||Nil|
There are also numerous other options for “Tax Planning for Senior Citizens” that can be conceived and cleverly implemented such that the seniors can avail the maximum tax benefit and end up with as lesser tax liability as possible. But it should be remembered that no unfair means should be used while framing a valid tax planning session else the same case then might turn into a case of tax evasion. Make your decisions wise and thoughts wiser because after all whatever you pay to the Government in form of taxes are ultimately spend on your benefits and comfort.