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How does income tax work for senior and super senior citizens?

income tax slab for senior citizen

Mr. Dubash, was born on 28th March 1955, making him a Senior Citizen of almost 64 years old, his mother has just turned the ripe old age of 84. Since his mother was born on 28th Feb 1935, according to Indian income tax laws she qualifies as a Super Senior Citizen. Initially, Mr. Dubash was under the impression, that the income tax computation for both him and his mother would be the same. Let’s find out if Mr.Dubash’s assumption is correct.

Source of Income: For senior and super senior citizens, income sources include:

• Pension
• Rental Income
• Interest on Savings
• Fixed Deposits
• Senior Citizen’s Savings Schemes
• Post Office Schemes
• Reverse Mortgage

Changes in Taxable Income Slabs: Prior to assessment year (A.Y.) 2015-2016, the minimum exemption limit on taxable income was ₹2.5 lakh, for senior citizens. Since then, the limit has been extended to ₹3 lakh. As mentioned earlier, Mr. Dubash’s mom is a super senior citizen, for her, if her annual income is ₹5 lakh or less, her taxable income is 0. Here are the income tax slabs—for financial year (F.Y.) 2018-2019—of senior and super senior citizens, along with tax rates.

Illustration of Income Tax Slab Rate for Senior Citizen (Above 60 years & less than 80 years) for F.Y. 2018-19

Income Tax SlabsTax RateHealth and Education Cess
Up To ₹3 lakhNo tax 
₹3 lakh–₹5 lakh5%4% of Income Tax
₹5 lakh–₹10 lakh20%4% of Income Tax
More than ₹10 lakh30%4% of Income Tax

 

Illustration of Income Tax Slab for Super Senior Citizen (80 Years and above) for F.Y. 2018-19

Income Tax SlabsTax RateHealth and Education Cess
Up To ₹5 lakhNo tax 
₹5 lakh–₹10 lakh20%4% of Income Tax
More than ₹10 lakh30%4% of Income Tax

 

*Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

*Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

*This surcharge remains applicable for all tax-paying Indians.

This was just an overview of the tax slab for senior citizen and income tax slab for senior citizen above 80 years. Now let’s look at other changes in tax computation.

 

Mr. Dubash and his mother and his mother fall under a demographic where health and socio-economic stability becomes paramount. Neither earn a steady source of income like a salary, which is why Mrs. Dubash invested in fixed deposits and similar saving schemes. She has inculcated this habit of savings and investments in her son from the time he began his career. The Dubash family, overall is comfortable, however, at times, intermittent health issues, create a dent in managing finances.

The 2018 Union Budget introduced several changes in income tax computation. These are primarily aimed at tax-saving and health-protection for senior and super senior citizens like Mr. Dubash and his mother. Here is a brief summary of each revision:

Section 80TTB: Income earned from interest on bank savings deposits, fixed/recurring deposit schemes and deposits in post office, now has an increased exempted amount. Prior to this change, interest income was computed u/s 80TTA for all Indians. Section 80TTB is specifically for senior and super senior citizens, where the exemption limit has been increased from ₹10,000 to ₹50,000. This is a significant increase, providing exclusivity and added benefits for India’s aging millions. Income tax computation for people like Mr. Dubash and his mother, will not be done u/s 80TTA anymore.

Section 80D: Exemption amount on health insurance premium payments u/s 80D have now increased from ₹30,000 to ₹50,000. Therefore, Mr. Dubash, his mother—and others in the same age-groups—have a better chance of getting good health coverage for themselves. Moreover, those paying insurance premium for their senior and/or super senior parents, can also avail tax-benefots under this section.

Section 80 DDB: Previously, the exemption limit for medical expenditure on specific critical illnesses, was separate for senior and super senior citizens (₹60,000 and ₹80,000). The revised exemption limit is now ₹1 lakh. This section gives income-tax relief on medical expenses incurred due to critical illnesses like cancer, motor neuron disease, AIDS etc.

Pradhan Mantri Vaya Vandana Yojana: This is a twin-benefit, annuity and insurance plan, which is now extended by two years (up to 2020). The investment ceiling has been doubled to ₹15 lakhs. Here’s a table summary to understand these changes better:

Exemption/SchemeF.Y. 2017-18F.Y. 2018-19
Exemption on income from interestExempted up to ₹10,000 (bank savings deposits and post office schemes) under Sec 80TTAExempted up to ₹50,000 (bank savings deposits, FD, RD, and post office schemes) under Sec 80TTB
Deduction on health insurance premiumExempted up to ₹30,000Exempted up to ₹50,000
Exemption on medical expenditure for specific critical illnessesExempted up to ₹60,000 (senior citizens) and ₹80,000 (super senior citizens)Increased to ₹1 lakh
Pradhan Mantri Vaya Vandana Yojana₹7.5 lakh investment limit (up until March 2018)₹15 lakh investment limit (up till March 2020)

 

From the overview and tables, Mr. Dubash is now able to understand that an income tax slab rate for senior citizen is different from the income tax slab for super senior citizen.

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