ITR Filing: Exemptions and deductions that senior citizens can claim for FY24

For the fiscal year 2024 and the assessment year 2024–2025, the income tax reporting season has already begun. Nonetheless, seniors receive significant tax breaks under income tax regulations. The individual must be 60 years of age or older but not older than 80 at any point during the year to qualify for these benefits.

A senior or super senior who earns more than the exemption amount is still required to pay taxes even though they are not required to file an income tax return (ITR). The exemption does not cover the actual tax liability; it only applies to filing the return.

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Together with income from other sources, the pension income is primarily responsible for taxes. But take note that government commuted pension income—that is, income that is immediately payable in a lump sum—is completely exempt from all taxes. Uncommuted pension income is subject to the relevant marginal slab rates and is taxable under the “Salaries” heading.

The taxation of commuted pension income from private businesses falls under the “Salaries” category, and the relevant tax rates apply.

Higher exemption limits

Investments in tax savings made by March 31, 2024, will be included in income tax returns for the 2023–2024 fiscal year. Benefits like Section 80C for interest income and health insurance premiums are eliminated under the new tax law. There are still benefits from the previous regime in many areas.

Senior citizens looking to pay off their tax liabilities first focus on their income sources. Take into account all of your income sources, including your salary, pension, fixed deposit income, interest from savings accounts, rent from rental properties, capital gains from investments, and so forth.

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Suppose an individual's total income is less than a certain threshold ( ₹5 lakhs in the previous tax regime and ₹7 lakhs in the current tax regime). In that case, they are also eligible for a tax rebate under Section 87A of the Income Tax Act. The rebate would equal ₹12,500 (or, in the event of a new tax regime, ₹25,000), less the actual tax amount.

Senior citizens have higher deduction limits and exemption benefits than younger taxpayers. The primary difference lies in the basic exemption ceiling, which denotes the maximum amount that is exempt from taxes. For instance, the maximum for older adults (60–80 years old) is currently ₹3 lakh, while the maximum for younger adults ( ₹2.5 lakh) is ₹2.5 lakh.

Their taxable income is directly decreased by this higher exemption level. The total income less the exemption cap and any relevant deductions is the taxable income. A greater exemption level means that a greater portion of their income is not subject to taxes.

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More deductions available for senior citizens

Similarly, there are more possible deductions.

• Section 80D: Seniors who may have greater medical expenses should take advantage of the premium deductions for health insurance. Compared to younger taxpayers, they are eligible for higher deduction limitations under Section 80D.
• Section 80TTB: Up to a certain amount, interest income from deposits may be deductible under this section. Seniors, who usually depend on interest income from savings accounts and fixed deposits, may find this especially helpful.
• Section 80C: This section allows for the deduction of investments made in various tax-saving options. Senior citizens can benefit from this by investing in plans such as the Senior Citizens Savings Scheme (SCSS), which offers competitive interest rates and is eligible for Section 80C deductions.

Seniors' taxable income is calculated by taking their total income and subtracting any applicable exemptions and deductions. This yields their taxable income. Below is a summary of the process:

Step 1: Calculate the total income. This includes any income the senior citizen receives from sources like:

• Pension earnings
• Interest earned on investments, such as savings accounts and fixed deposits
• Revenue from other sources (business revenue, capital gains, etc.) in addition to rental income

Step 2: Benefit from available deductions. Many deductions are available to senior citizens under various sections of the Income Tax Act. Several typical ones are:

• Section 80D: Premium deductions for health insurance (usually with higher caps for seniors)
• Section 80TTB: Up to a predetermined maximum, interest income from deposits is deductible.
• Section 80C: Investment deductions for a range of tax-saving strategies, such as the beneficial SCSS.

Step 3: Compared to younger taxpayers, senior citizens enjoy a higher basic exemption level.

• The current exemption limit for senior folks (aged 60 to 80 years) is ₹3 lakhs.
• Older people (80 years of age and above) are eligible for an even higher exemption ceiling (currently ₹5 lakh).

Step 4: Calculate your taxable income.

• Deduct from the total income (Step 1) the appropriate deductions claimed under various sections (e.g., 80D, 80TTB, and 80C).
• Use the exemption limit (Rs. 3 lakh or Rs. 5 lakh) based on the senior citizen's age.

It is taxable income if the remaining sum after deductions is greater than the exemption threshold.

Essentially, seniors' taxable income is reduced by a combination of higher exemption limits and additional deductions. This means they may be able to keep more of their retirement income and pay less in taxes overall.

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Next, there is the cessation of health education and the surcharge. To determine the final tax liability, the applicable surcharge (if any) and the 4% health and education cess would be subtracted. The tax liability amount would be increased by any interest consequences, penalties, or late filing fees that may arise.