The Budget 2024 brought about several changes to the capital gains structure, tax deducted at source (TDS), and other related aspects. However, if you are a senior citizen, many of these changes may not have a significant impact on you. It is essential for senior citizens to understand the implications of Budget 2024 and how it will affect their tax planning.
How senior citizens are impacted after Budget 2024
CA Abhishek Soni, co-founder, Tax2Win shares some of the changes in Budget 2024 relevant to senior citizens:
Standard deduction
The standard deduction limit for family pensioners has been increased to Rs 25,000 from Rs 15,000. This enhanced deduction is now available to individual taxpayers receiving family pensions.
“The finance minister proposed to increase the standard deduction for salaried employees from Rs 50,000 to Rs 75,000. Also, deduction on family pension for pensioners is proposed to be enhanced from Rs 15,000 to Rs 25,000 under the new tax regime. This will provide relief to about four crore salaried individuals and pensioners,” said the finance ministry in a press release dated July 23, 2024.
Slab rates applicable for senior citizens
The slab rates applicable for senior citizens (aged 60 and above) in FY 2024-25 (AY 2025-26) are shown in the table below:
Source: Income tax department websiteThe slab rates applicable for super senior citizens (80 and above) for FY 2024-25 (AY 2025-26) are shown below:
Source: Income tax department website
“Senior citizens have higher income exemption limits under both the old tax regime and new. In contrast, ordinary individuals have a lower tax threshold of Rs 2.5 lakh under the old tax regime,” says Soni.
Which senior citizens do not have to file income tax return (ITR)
According to Soni, section 194P provides the conditions for exempting senior citizens from filing ITR if they are 75 years and above.
The conditions for exemption from filing income tax returns are:
1. Age Requirement: The individual must be 75 years or older.
2. Residency Status: The individual must be a ‘Resident’ for the previous financial year.
3. Income Sources: The individual’s income should be limited to pension and interest income only. Additionally, the interest income must be accrued or earned from the same specified bank where the pension is received.
4. Declaration Submission: The individual must submit a declaration to the specified bank regarding their income and tax details.
5. Specified Bank: The bank where the pension is received must be a ‘specified bank,’ as notified by the central government. These banks are responsible for deducting TDS based on the individual’s income and any applicable deductions under Chapter VI-A and rebate under Section 87A.
6. No Further Filing Required: Once the specified bank deducts the appropriate tax, there will be no requirement for the senior citizen to file an income tax return.
What are some of the tax deductions available to senior citizens?
Section 24 (b) tax deduction for interest on home loan
If you opt for the old tax regime, you can get a tax deduction for the home loan’s interest component. This deduction is available for interest paid on home loan and home improvement loan. In the case of self-occupied property, the upper limit for deduction of interest paid on a home loan is Rs 2 lakh.
Source: Income tax department website
Tax deductions under various sections
Sections 80C, 80CCC, 80CCD (1)
Under the sections- 80C, 80CCC and 80 CCD (1) – the combined tax deduction that can be claimed is Rs 1.5 lakh in a financial year. This means you can claim a maximum of Rs 1.5 lakh as tax deduction under all these sections under the old tax regime.
Section 80C
Some of the 80C tax deductions and eligible payments/ investments are:
- Life Insurance Premium
- Provident Fund
- National Savings Certificate (NSC)
- Home loan’s principal component
Section 80CCC
Payment made towards annuity plan of LIC or other insurer towards pension scheme.
Section 80CCD (1)
80CCD (1) is a deduction based on the contributions made to the National Pension Scheme (NPS).
Section 80 CCD (1B)
An additional deduction of up to Rs 50,000 for investments in NPS. This limit is over and above the Rs 1.5 lakh 80C, 80CCD (1) and 80CCC limit mentioned above.
Section 80D
Senior citizens can claim up to Rs 50,000 for health insurance premiums paid. Additionally, up to Rs 5,000 can be claimed as tax deduction for preventive health check-ups. This limit of Rs 5,000 is under the umbrella limit of Rs 50,000.
Source: Income tax department
Section 80DD
Deduction towards payments made towards maintenance or medical treatment of a disabled dependent or paid / deposited any amount under relevant approved scheme.
“If the Taxpayer is claiming deduction under section 80DD then it is recommended to file form 10-IA also before filing of return. Form 10IA can be filed later also however it is recommended to file form 10-IA along with return of income to avoid any inconvenience later,” said the income tax department on its website as of August 16, 2024.
Section 80GGC
Contributions to political parties or electoral trusts are deductible at 100% of the donation.
Deduction under Section 80TTB
Interest income from bank and post office deposits is deductible up to Rs 50,000 for senior citizens.
Reverse Mortgage
Proceeds from a reverse mortgage scheme are not taxable.
Section 80GG
This deduction is available towards house rent paid and is applicable only for those taxpayers for whom HRA is not part of salary.
Lesser of the following is allowed as deduction:
- Rent paid reduced by 10% of Total Income before this deduction
- Rs 5,000 per month
- 25% of Total Income before this deduction
“Form 10BA to be filed for claiming this deduction,” said the income tax department on its website.
According to Section 208, anyone with an estimated tax liability of Rs 10,000 or more for the year must pay their tax in advance in the form of advance tax. However, Section 207 provides relief from advance tax payment for resident senior citizens.
“Thus, a Resident Senior Citizen, not having any Income from Business or Profession, is not liable to pay Advance Tax,” said the income tax department on its website.
