How much pension will pensioners/Senior Citizens be taxed on? Know the new tax guidelines! – StudyToper

Pension is an important source to ensure economic security in old age. However, the income of senior citizens may be affected due to tax on pension. Therefore, it is important to know how much pension will be taxed and what tax exemptions are available. For the financial year 2024-25, the government has implemented some new tax rules for pensioners and senior citizens.

In this article we will give detailed information about the new tax guidelines for pensioners and senior citizens. We will also understand which tax slabs are applicable for which age group and how much tax will have to be paid on pension. We will also explain the various exemptions and deductions that are available to senior citizens.

Tax rules for pensioners and senior citizens

There are some special provisions in the tax rules for pensioners and senior citizens. Let’s take an overview of these rules:

Income Tax Slabs for Senior Citizens

Income tax slabs for senior citizens vary according to their age. Let us see what tax slabs apply for different age groups:

Tax slab for age 60 to 80 years (old tax regime)

• Up to ₹3,00,000: No tax
• ₹3,00,001 to ₹5,00,000: 5%
• ₹5,00,001 to ₹10,00,000: 20%
• Above ₹10,00,000: 30%

Tax slab for above 80 years of age (old tax regime)

• Up to ₹5,00,000: No tax
• ₹5,00,001 to ₹10,00,000: 20%
• Above ₹10,00,000: 30%

Tax slabs under the new tax regime (for all age groups)

• Up to ₹3,00,000: No tax
• ₹3,00,001 to ₹6,00,000: 5%
• ₹6,00,001 to ₹9,00,000: 10%
• ₹9,00,001 to ₹12,00,000: 15%
• ₹12,00,001 to ₹15,00,000: 20%
• Above ₹15,00,000: 30%

Calculation of tax on pension

The following points should be kept in mind while calculating tax on pension:

1. Standard Deduction: Standard deduction of ₹50,000 is available on pension.
2. Family Pension: Now standard deduction of ₹ 25,000 will be available on family pension.
3. Tax Slab: Tax will be calculated as per the above tax slab.
4. Tax Rebate: Under Section 87A, a tax rebate of ₹25,000 is available on income up to ₹7,00,000.
5. Other Income: Income received from sources other than pension will also be added to the total income.

Tax exemptions and deductions for senior citizens

There are several special tax exemptions and deductions available for senior citizens:

1. Section 80TTB: Exemption up to ₹50,000 on interest earned on bank deposits, fixed deposits and post office deposits.
2. Section 80D: Deduction up to ₹50,000 on health insurance premium.
3. Section 80DDB: Deduction up to ₹1,00,000 on treatment of serious illnesses.
4. Section 80C: Deduction up to ₹1,50,000 on PPF, ELSS, life insurance premium, etc.
5. NPS: Additional deduction of ₹50,000 under section 80CCD(1B).

Tax on Senior Citizen Savings Scheme (SCSS)

SCSS is a popular investment option that offers high interest rates to senior citizens. The tax rules on SCSS are as follows:

1. Deduction up to ₹1,50,000 is available under Section 80C on the amount invested in SCSS.
2. The interest income received from SCSS is taxable. However, exemption up to ₹50,000 is available under Section 80TTB.
3. TDS: If the interest received from SCSS exceeds ₹50,000 in a financial year, 10% TDS will be deducted.

Special provisions for senior citizens above 75 years of age

There are some special provisions for senior citizens aged 75 years and above:

1. Exemption from ITR filing: If their income is only from pension and interest received from the same bank where the pension is deposited.
2. terms:
   • The age of the person should be 75 years or more.
   • The individual must be ‘resident’ in the previous financial year.
   • The source of income should be pension and interest only.
   • The interest income should be from the same bank where the pension is deposited.
3. Bank’s Responsibility: The bank will deduct the necessary TDS and there is no need to file ITR.

New tax regime vs old tax regime

It is important for senior citizens to choose between the new and old tax regime:

New tax regime:

• low tax rates
• less complex
• Many exemptions and deductions not available

Old Tax Regime:

• More discounts and deductions available
• Higher basic exemption limit for senior citizens
• More complex but beneficial in some cases

Tips for tax saving

Senior citizens can take the following measures to reduce their taxes:

1. Tax-saving investments: Invest in PPF, ELSS, tax-saving FD etc.
2. Health Insurance: Get a good health insurance policy that also offers tax savings.
3. Donation: Get tax exemption by donating to recognized organizations.
4. NPS: Invest in NPS for additional tax benefits.
5. SCSS and PMVVY: Get higher interest rates and tax benefits by investing in these schemes.
6. Choosing a tax regime: Choose the right tax regime based on your income and investments.

Documents required for ITR filing

Senior citizens should keep the following documents ready while filing ITR:

1. Form 16 (if receiving pension)
2. Bank statement
3. Investment Certificates (PPF, FD, SCSS etc.)
4. health insurance premium receipt
5. donation receipts
6. pan card
7. Aadhar card

Disclaimer

This article has been written for general information purposes only. Tax rules may change from time to time, so it is advisable to consult official sources or tax experts for the latest information. Always consult a qualified financial advisor before making personal financial decisions.