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THE
ORANGE
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Blog
2 mins Read | 1 Year Ago

The new senior citizen benefit related to tax returns

The new senior citizen benefit related to tax returns

Taxation policies have always been a focal point of our Central Budget, since they largely impact the disposable income of people from all walks of life. For the past few years, the Union Government has ensured that it brings in policies that favour senior citizens, by increasing allowances for tax exemptions and deductions on medical insurance, income from banking interest instruments such as Fixed Deposit and Savings Deposit, and also providing relief to senior citizens from filing advance tax.

This year, while presenting the Union Budget 2021, our Finance Minister Mrs. Nirmala Sitharaman announced that senior citizens above the age of 75 years, relying solely on pension and interest as a source of income, would be exempted from filing income tax returns.

This measure taken by the Central Government has been introduced with the aim of reducing the burden of compliance of Income Tax regulations for senior citizen pensioners of our country. To be a beneficiary of this policy, you need to comply with the following eligibility criteria:

1) You must be a resident of the country and crossed the age of 75 years

2) Your only sources of income should be pension and interest payments

3) You must receive your interest income and pension income from the same banking institution

4) Your bank must be a part of the specified bank’s list, as notified by the Government

5) If you comply with the above mentioned criteria, then you must furnish a declaration to your specified bank to avail this benefit

After you furnish your declaration, the specified bank is responsible for calculating your income as per the relevant deductibles and exemptions, and will also consequently deduct the requisite income tax from your account accordingly.

There is also a sense of ambiguity that prevails around how this policy would be implemented. It is still unknown which banks would fall under the list of ‘specified banks’ for this policy and there are multiple unresolved queries laid out by tax experts who are confused if pensioners who are earning interest from multiple banks can be valid beneficiaries for this scheme.

Do senior citizens have to file tax return in India?

The answer to this question is both a ‘Yes’ and a ‘No’. Colloquially, the term senior citizens in India is used to refer to people who are over and above the age of <60>. However, in the context of this particular tax benefit, senior citizens only above the age of 75 can avail exemption from filing an ITR.

This benefit in itself caters to a very niche demographic. If you are above the age of 75 years but yield some form of income from rent or even small dividends from equity, then you are not exempted from filing your income tax returns under this new tax regime for senior citizens.

Income tax rebate for senior citizens

If a senior citizen even above the age of 75 years has to claim a tax rebate of any form, they must file an Income Tax Return. It is recommended that beneficiaries of this scheme who have no other sources of income other than pension and interest from the bank, should submit form 15H in all banks where deposits are held to avoid the bank from deducting TDS. However, if Tax Deducted at Source (TDS) gets deducted, they will have to file an ITR to claim a refund.

How do you calculate the age of senior citizens for income tax return eligibility?

To calculate a senior citizen’s age for income tax is simple. Since a financial year ends on the 31st of March and begins from the 1st April every year, a senior citizen should have turned 75 years of age before this date. This means that people born on or before Apr 01, 1946 are eligible beneficiaries for this scheme.

It must be emphasised that senior citizens who are above 75 years of age are only exempted from filing returns. They still have to pay their due taxes as per the tax slabs that would be deducted by the bank itself.

T&C apply

 

 

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