ITR filing: Taxable Income calculation for Senior Citizens for filling income tax returns.

The taxable income for senior citizens is subject to specific tax rules and exemptions. The taxable income is calculated for senior citizens as follows:

  1. Income Sources: Consider all sources of income, including salary, pension, interest income from savings accounts, fixed deposits, rent from property, capital gains from investments, etc.
  2. Exemptions and Deductions: Senior citizens are eligible for higher deduction limits as well exemption benefits compared to other taxpayers. Accordingly, senior citizens would be required to take into consideration such higher limits for deductions and exemptions while calculating their taxable income.

For example, senior citizens can avail themselves of additional deductions such as Section 80D for health insurance premiums, Section 80TTB for interest income from deposits, and the benefits of deduction under Section 80C for investments in the Senior Citizens Savings Scheme, among others.

  1. Calculation of Taxable Income: By subtracting the eligible exemptions and deductions from the total income, we will get the taxable income. For example, if a senior citizen has a total income of Rs 10,00,000, and avails of the full benefit of the basic exemption limit of Rs 3,00,000 and deductions under various sections amounting to Rs 50,000, the taxable income would be Rs 6,50,000.
  2. Tax Calculation: Once the taxable income is determined, apply the applicable tax rates to calculate the tax liability. It is pertinent to note that senior citizens and super senior citizens enjoy a higher basic exemption limit of Rs 3 lakhs and Rs 5 lakhs, respectively.

However, no such benefit of higher basic exemption limit is available under the new tax regime. The applicable tax rates for Financial Year 2023-24 under the old tax regime and new tax regime (default) are as follows:

Income SlabsOld Tax RegimeIncome SlabsNew Tax Regime (Default tax regime)
Tax Rate for Senior Citizens
(60-80 years)
Tax Rate for Super Senior Citizens
(80 years and above)
Tax Rate for Senior Citizens & Super Senior Citizens
Up to Rs 3,00,000NilNilUp to Rs 3,00,000Nil
Rs3,00,001 to Rs 5,00,0005%NilRs3,00,001 to Rs 6,00,0005%
Rs 5,00,001 to Rs 10,00,00020%20%Rs 6,00,001 to Rs 9,00,00010%
Above Rs 10,00,00030%30%Rs 9,00,001 to Rs 12,00,00015%
Rs 12,00,001 to Rs 15,00,00020%
Above Rs 15,00,00030%
  1. Rebate u/s 87A: Calculate the applicable rebate under Section 87A. Senior citizens would be eligible for a rebate under Section 87A if their total income is up to a specified limit (Rs. 5 lakhs under the old tax regime and Rs. 7 lakhs under the new tax regime). Such rebate would be lower of the actual tax amount or Rs. 12,500 (enhanced to Rs. 25,000 in case of new tax regime).
  2. Surcharge & Health and Education Cess: The applicable surcharge, if any and health and education cess @ 4% would be computed to arrive at the final tax liability. In case there are any interest consequences or penalty/ late filing fees, the same would be added to the tax liability amount.

Government Pensions: Income from a Commuted Pension, which is received as a lump sum, is fully exempt and not subject to tax rates. However, Uncommuted Pension income is taxable under the category of “Salaries” and falls under the applicable marginal tax slab rates.

Income from a commuted pension received from private companies is taxable under the category “Salaries” and is subject to the prevailing tax rates. However, an exemption under section 10(10A) is available as follows:

One-third of the commuted pension amount, which the employee would have received if he had commuted the entire pension, is exempt if the employee also receives gratuity.

One-half of the commuted pension amount is exempt if the employee has not received any gratuity.

Income from an uncommuted pension is taxable under “Salaries” and is subject to the applicable marginal tax rates.

Old tax regime allows various deductions and exemptions which otherwise may not be allowed under the new tax regime u/s 115BAC. If an individual follows old tax regime, then he is eligible for the following deductions pertaining to the pension income. A taxpayer derives the following benefits from NPS:

Taxpayer would be eligible for tax exemption on the amount withdrawn upto 25% of the self-contribution, on such terms and conditions as may be specified by PFRDA u/s 10(12B).

Taxpayer would be eligible for tax exemption on lumpsum withdrawal of 60% of accumulated pension wealth upon attaining the age of 60 or superannuation under section 10(12A).