Seniors citizens must disclose all forms of income in ITR to avoid charge

Review forms 26AS and Annual Information Statement to see if you are eligible for refund of TDS

Indian tax laws offer a number of benefits to senior citizens who should be aware of them at the time of making tax-saving investments and while filing their Income-Tax Returns (ITRs). They should avoid common mistakes while carrying out this task.

Who is a senior citizen?

There are two categories for tax purposes: senior citizens and super senior citizens. “Resident individuals aged 60 years or more (but below 80 years) during the year are classified as ‘senior citizens’, while resident individuals aged 80 years or more during the year are classified as ‘super senior citizens’. The basic exemption limit is Rs. 3 lakh for senior citizens and Rs. 5 lakh for super senior citizens,” says Suresh Surana, founder of RSM India.

Also Read: Filing tax returns for the first time? Make sure you read these handy tips

Report all forms of income

Many senior citizens fail to disclose certain incomes like interest, commissions, or dividends in their ITRs. “Report all types of income in the ITR, regardless of the amount or whether tax has been deducted from it. Non-disclosure of income will be considered as under-reporting. It could also result in penalties and scrutiny by the tax department,” says Naveen Wadhwa, deputy general manager, Taxmann.

Claim Section 80TTB, 80C deduction

Resident senior citizens can claim an enhanced deduction of up to Rs. 50,000 under Section 80TTB of the I-T Act against interest earned on fixed deposits, savings accounts of commercial banks, cooperative banks, and post offices.

“Those who have invested in Senior Citizens Savings Scheme should avail of Section 80C deduction,” says Archit Gupta, chief executive officer, Clear.
 

Income from properties

Sometimes, senior citizens pay rent to their parents and claim house rent allowance (HRA). Such parents should include the rent they receive in their ITRs.

A senior citizen who owns more than two residential properties may consider two as self-occupied and treat the rest as ‘deemed let-out’.  Wadhwa says, “Senior citizens must compute the notional income on such deemed let-out property. This income will be subject to taxation under the head ‘income from house property’ in their ITRs.”

Exemption from filing ITR

Filing an ITR is not mandatory for senior citizens who only have income from bank deposits, which is below the maximum basic exemption limit. But they must file an ITR if they qualify for tax refund.

Many seniors assume they don’t need to file returns if tax deducted at source (TDS) is from their income receipts. Exemption from return filing is subject to several conditions: the senior citizen should be 75 or above; he should be a ‘resident’ in the relevant financial year; he should have pension and interest income only; and his interest income should accrue from the same specified bank in which he receives his pension.

Also Read: Filing your returns? Know key changes in ITR for assessment year 2023-24

Standard deduction on pension income

A standard deduction of up to Rs. 50,000 can be claimed against salary and pension income under Section 16(ia) of the I-T Act. Effective from FY 2022-23, pensioners opting for the new tax regime can also claim this standard deduction.

Claim TDS refund

Senior citizens need to heed a few points while filing their ITRs. Surana says, “A very senior citizen aged 80 years or more filing ITR in Form SAHAJ (ITR-1) or SUGAM (ITR-4) and having a total income of more than Rs. 5 lakh, or having a refund claim, can file ITR in paper mode, i.e., electronic filing is not mandatory.”

Senior citizens aged 60 years or more don’t need to pay advance tax if they don’t have income under the head, “Profit or gain from business or profession”.

Before filing their ITRs, senior citizens must review Forms 26AS and the Annual Information Statement (AIS) to check if any TDS has been deducted on their income. If their income is below the taxable limit, they will be eligible for a refund of this amount.

“Even if capital assets are sold and the entire gains reinvested, they must report their capital gains in the ITR. This will allow them to claim refund of the TDS deducted on sale of property,” says Gupta.

Seniors must not overlook Sec 87A rebate

• A tax rebate under Section 87A is allowed when the total income of a resident individual does not exceed a specified limit
• For Assessment Year 2023–24, the tax rebate under Section 87A is allowed if a resident individual’s total income does not exceed Rs. 5 lakh
• This limit applies in both the old and the new tax regimes
• Tax rebate under this provision is allowed to the extent of Rs. 12,500
• If the total tax, excluding cess, is less than or equal to Rs. 12,500, then the whole amount can be claimed as rebate by the assessee