Every individual who is earning is required to pay income tax as per the income tax slab. Certain exemptions are also provided by the government on the tax. However, senior citizens and a very/super senior citizen are granted a higher exemption limit as compared to normal taxpayers.
The exemption limit for the assessment year 2021-22 available to a resident senior citizen is Rs 3,00,000 while for non-senior citizen it is Rs 2,50,000. A very senior citizen is granted a higher exemption limit compared to others. The exemption limit for the assessment year 2021-22 available to a resident very senior citizen is Rs 5,00,000.
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Taxpayers can note that the exemption limit is the quantum of income up to which a person is not liable to pay tax.
It is very important to know that the tax benefits offered under the Income-tax Law to a senior citizen/very senior citizen are available only to resident senior citizen and resident very senior citizens.
A senior citizen must be of the age of 60 years or above but less than 80 year at any time during the respective year to qualify as a senior citizen. While to qualify as a very senior citizen the person must be of the age of 80 years or above at any time during the respective year.
Benefits available under the Income-Tax law to senior citizen:
1. E-filing of income tax return: From Assessment year 2019-20 onwards, a very senior citizen filing his return of income in Form ITR 1/4 can file his return of income in paper mode, i.e., for him, e filing of ITR 1/4 (as the case may be) is not mandatory. However, he may go for e-filing if he wishes.
2. Advance tax: As per section 208, every person whose estimated tax liability for the year is Rs 10,000 or more, shall pay his tax in advance, in the form of “advance tax”. However, section 207 gives relief from payment of advance tax to a resident senior citizen.
As per section 207 a resident senior citizen (an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession, is not liable to pay advance tax.
3. Interest on deposits: Section 80TTB of the Income Tax law gives provisions relating to tax benefits available on account of interest income from deposits with banks or post office or co-operative banks of an amount upto Rs 50,000 earned by the senior citizen. Interest earned on saving deposits and fixed deposit, both shall be eligible for deduction under this provision.
Section 194A of the Income Tax law gives corresponding provisions that no tax shall be deducted at source from payment of interest by bank or post-office or co-operative bank to a senior citizen up to Rs 50,000. Therefore, limit is to be computed for every bank individually.
4. Filing Income-tax return (ITR): Income-tax Act, 1961 provides no exemption to senior citizen or very senior citizen from filing of return of income. However, to provide relief to the senior citizens (whose age is 75 years or more) and to reduce the compliance burden on them, the Finance Act, 2021, has inserted a new section 194P.
This provision requires a banking company to deduct tax under this provision if deductee is maintaining an account with it in which he is receiving his pension income. The tax is required to be deducted under this new provision if the recipient is a resident individual whose age is 75 years or more at any time during the year and the following conditions are fulfilled:
a) Total Income of the deductee consists only income in the nature of pension and interest received or receivable from any account maintained with deductor (such bank).
b) Deductee has furnished a declaration to deductor containing prescribed particulars.
If the above conditions are satisfied, the deductor shall compute the income of deductee after giving effect to the deduction allowable under Chapter VI-A and rebate under section 87A. Tax on such income is required to be deducted on the basis of rates in force.
If tax is deducted from the income of such senior-citizen, he shall not be liable to furnish the return of income for the previous year in which tax has been deducted.