Financial advisor and writer Arnav Pandya deciphers the various income tax benefits available to senior citizens depending on the exact age and so on.
There are two categories within the senior citizen bracket individuals need to know to get the best benefits on the tax front.
This differentiation is important from the point of view of ensuring that the right details are calculated about a person depending upon their exact age and hence this is something that needs attention.
A lower amount of tax would ensure that a larger figure is left in their hands; enabling them to get more out of their money. Most senior citizens have interest and income from other sources that arises from their investments.
So every rupee for them is valuable in getting more benefits. Here is a closer look at the details of what the senior citizens can actually look forward to.
The first thing to check is the time period when the individual would be classified as a senior citizen. This age is now 60 years which is on par with the details that are witnessed in other areas like railway concession and so on.
A few years ago this age was 65 years and this has been brought down to 60 years. This means that the individual can get the benefit from an earlier time period.
The other thing is that there is no distinction between a male and a female person when a senior citizen stage is reached. So this leads to an easier way in which the various calculations can be completed.
The benefits will start when an individual reaches the age of 60 years at some point during the year. So, this is the landmark that one has to be look out for in determining the eligibility of the benefits.
There are two categories into which the senior citizens can be classified when the question of the benefits under the Income Tax is concerned. The benefit is related to the basic exemption limit which is the amount till which there will not be any tax to be paid on the taxable income.
The two categories are those who fall in the age bracket 60-79 years and those who are 80 years and above. There are clear and different figures which is significantly different for these two categories.
Those who are 60 years but have not yet touched 80 would get a basic exemption limit of Rs 2.5 lakh. This is the amount till which the individual will not have to pay any income tax.
The figure for those who are 80 years and above is double this amount which is Rs 5 lakh. This is a large figure and hence one passes the age there is a larger income that would be out of the tax net.
The very basic nature of the basic exemption limit then also impacts the tax slabs that the senior citizens face when their income exceeds this figure. The first slab runs from Rs 2.5 lakh to Rs 5 lakh for those who are in the 60-79 years bracket.
The rate for this particular slab is 10 percent. As the income crosses the Rs 5 lakh the next slab of 20 percent kicks in and this is what the individual will have to pay when they are calculating their tax.
On the other hand, there is no 10 percent slab for those who are in the 80 plus years category. This happens because till Rs 5 lakh their income is not subject to tax so the moment they cross this figure they are already in the 20 percent tax bracket and this rate starts applying to them.
Every individual needs to look carefully where they belong. Then look at how they will consider their income and the tax impact so that they are able to save the maximum from the amount that they earn.