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Senior citizens income from a variety of sources, including pensions, fixed deposits, savings interest, and rental income. Under the Income Tax Act 1961, income tax on senior citizens includes all sources of taxable income or income earned in a particular financial year. If you are wondering how to income tax calculation for senior citizens. Lets read on.

Seniors and super-seniors receive higher deduction limits compared to non-seniors. The amount of income an individual is exempt from the tax is called the deduction limit.

The tax limits for senior citizens in India are as:

If you are over 60 and under 80, the tax amount is Rs 300,000. If you are over 80 years old, the tax amount is Rs 5 lakh.

What is The Standard Deduction for A Senior Citizen

The Indian tax system allows a flat deduction for salaried employees and receiving pensions for taxpayers. This deduction was Rs. 40,000 in 2018-19 and has since been increased to Rs. 50,000 in 2019.

Additionally, taxpayers do not need to provide disclosure or proof of investment to claim this deduction. As a result, Indian taxpayers can choose between an existing personal deduction or a standard deduction of Rs. 50,000 from 2022.

Indian law recognizes all persons residing between the ages of 60 and 80 as senior citizens. A pension is a stipend or regular allowance awarded as a result of a person’s past services, especially those of a senior citizen.

In the Indian tax system, pensions received by seniors citizen from their previous employers are taxed under the head of ‘salaries’.

Under Section 16 of the IT Act, a pensioner is entitled to a deduction of Rs.50,000 per annum or the pension amount, whichever is less. Therefore, the reintroduction of the standard deduction has eased the financial burden on the seniors citizen.

What is The Tax Exemption Limit for Senior Citizens

Individual taxpayers who opt for the new tax regime must forego the majority of the tax exemptions available under the old or existing income tax regime.

After the new rules on income tax for senior citizens and the new income tax exemption for super-senior citizens, the upper limit of the basic allowance for these two age groups will not be increased.

This means that each person, regardless of age, would have ₹2.5 lakhs as the basic exemption limit for a given financial year.

How Can Senior Citizens Avoid Taxes

Retirement is certainly a time to relax after years of hard work. this is one of the most important concerns for many retirees on how to make the best use of the accumulated retirement corpus that will keep tax liability.

If you’re a senior looking for the best tax-saving tips, here are four options you can try.

  1. Invest in senior citizen`s savings programs

These SCSS (senior citizen`s savings schemes) offers the best after-tax returns of any fixed-income product. The maximum allowed investment in SCSS is INR 15000 for 5 years, renewable for additional 3 years. Seniors looking to save tax can choose this financial product that offers tax benefits under Section 80C of the Income Tax Act of 1961.

  1.  Take advantage of the tax slab income tax system

Super senior citizens(persons over 80 years old) are tax-exempt up to a maximum of Rs 5 lakh. A non-retiree pays a 5% tax on the taxable amount of Rs 2.5 to 5,00,000 lakh, while a senior citizen can enjoy a higher limit of Rs 3 to 5,00,000 lakh.

  1.  Invest in health insurance

Health insurance provides much-needed financial protection against rising hospital costs. Investing in such insurance is a smart option as it provides tax benefits for Section 80D premiums paid. But a non-retiree receives a deduction of  Rs 20,000, while senior citizens can enjoy a higher limit of Rs 30,000.

  1.  Invest in a 5-year Fixed Deposit (FD)

A 5-year FD offers the dual benefits of tax savings and wealth accumulation. If you are a senior citizen, you can opt for such an FD to take advantage of higher interest rates.

When Retired What Income Is Taxed

Retirement income is income provided to a person based on services rendered on behalf of an employer. After retirement, many people usually receive a pension for the services they provide to their employer. This income is assessed as part of income tax under the heading “salaries”. As such, income is taxed according to the income tax slab rate and age.

Income Tax SlabExisting Tax Regime Income Tax RateIncome Tax SlabNew Tax Regime u/s 115BAC
Up to ₹ 3,00,000NilUp to ₹ 2,50,000Nil
₹ 3,00,001 –  ₹ 5,00,0005%₹ 2,50,001 – ₹ 5,00,0005%
₹ 5,00,001 – ₹ 10,00,00020%₹ 5,00,001 – ₹ 7,50,00010%
Above ₹ 10,00,00030%₹ 7,50,001 – ₹ 10,00,00015%
₹ 10,00,001 – ₹ 12,50,00020%
₹ 12,50,001 – ₹ 15,00,00025%
Above ₹ 15,00,00030%

How Do You Calculate Taxes in Retirement

Income tax calculation for senior citizens. When you retire from your current job, you are generally classified as an old-age pensioner at age 60. Therefore, both seniors citizen and super seniors citizen fall into this category. The union budget for Fiscal Years 22-23 carefully specifies the details of a senior citizen’s income tax return as follows:

For seniors citizen(ages 60-80):

Income Tax  Slab
New Tax Regime
Up to ₹ 2,50,000Nil
₹ 2,50,001 – ₹ 5,00,000 5%
₹ 5,00,001 – ₹ 7,50,000 10%
₹ 7,50,001 – ₹ 10,00,000 15%
₹ 10,00,001 – ₹ 12,50,000 20%
₹ 12,50,001 – ₹ 15,00,000 25%
Above ₹ 15,00,000 30%
For seniors citizen(ages 60-80)

Super seniors citizen (above ages 80):

Income Tax  SlabNew Tax Regime
Up to ₹ 2,50,000  Nil
₹ 2,50,001 – ₹ 5,00,000 5%
₹ 5,00,001 – ₹ 7,50,000 10%
₹ 7,50,001 – ₹ 10,00,000 15%
₹ 10,00,001 – ₹ 12,50,00020%
₹ 12,50,001 – ₹ 15,00,000 25%
Above ₹ 15,00,00030%
Super seniors citizen (above ages 80)

Benefits of an Income tax calculator for calculating income tax For a Senior Citizens:

  1. An online income tax calculator stores all the information you need when filling out your income tax return. You don’t have to enter all the details every time you start your annual income tax return. This is a very convenient way to help eliminate redundancy.
  1. The tool saves valid information for future use, but you can ensure its confidentiality. Filing your income tax on paper can be damaging because it can end up in the wrong hands. However, your online data is stored in an encrypted system. Therefore, there is no possibility that the document will be processed incorrectly.
  1. As soon as you have calculated and entered your income tax data, you will receive an automatic confirmation of completion. You will also receive it via your registered email ID as proof of your correct income tax return.
  1. You can also save the data without completing the entire process. For example, if you miss an important document in the process, you can save the incomplete data as a draft. As soon as you search in the history or saved drafts tabs, the data is immediately retrieved and the process can be completed.

Frequently Asked Questions (FAQs):-

Is FD interest taxable for senior citizens?

A 5-year FD offers the dual benefits of tax savings and wealth accumulation. If you are a senior citizen, you can opt for such an FD to take advantage of higher interest rates. That will be exempt from total income according to Section 80C of the Income Tax Act.

Do pensioners pay tax?

All seniors can earn up to ₹3 lakh tax-free income and super seniors over 80 can earn up to ₹5 lakh tax-free income. If senior citizens or super citizens’ pensions are above the Income tax slab, then in this condition they have to pay tax.

Do retired senior citizens need to file taxes?

You have to pay income taxes in retirement If you do have not tax-exempt income.

Conclusion

Now as you know about Income tax calculation for senior citizens. The main sources of income for senior citizens are pensions, rental income, savings, and time deposits.

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