Provisions of Budget 2024: For Senior & Super Senior Citizens

Hon'ble Finance Mister presented Budget 2024 on 23rd July 2024. The Budget 2024 is going to become a roadmap for "VIKSIT BHARAT". The Current Budget is growth oriented and keeps promises of the government for all stakeholders. Union Budget, 2024 is determined to ensure that all Indians, regardless of religion, caste, gender and age, make substantial progress in realising their life goals and aspirations.

Main priorities of the Budget 2024 are on employment, skilling, MSMEs, and the middle class. In line with the strategy set out in the interim budget, this budget envisages sustained efforts on the following 9 priorities for generating ample opportunities for all.

1) Productivity and resilience in Agriculture

2) Employment & Skilling

3) Inclusive Human Resource Development and Social Justice

4) Manufacturing & Services

5) Urban Development

6) Energy Security

7) Infrastructure

8) Innovation, Research & Development and

9) Next Generation Reforms.

The budget also covers some of the previously made announcements with an intent to strengthen them and step up their implementation for expediting our journey towards the goal of Viksit Bharat.

The Budget 2024 tried to fulfill expectation of all persons and industries in India with limited resources. The Budget 2024 has given reliefs in Direct Taxes to Individuals such as increase in Standard Deduction for salaried personal from Rs. 50,000/- to Rs. 75,000/- and for pensioners from Rs. 15,000/- to Rs. 25,000/-, it has changed tax slab in new scheme, reduced Capital Gain Tax from 20% to 12.5% and removed indexation benefits, it allowed NPS in the name of minors, etc.

WHAT IS IN THE BUDGET 2024 FOR SENIOR / SUPER SENIOR CITIZENS

SENIOR CITIZEN/SUPER SENIOR CITIZEN

AS PER INCOME-TAX ACT, 1961

SENIOR CITIZEN is an individual whose age is 60 years or more but less than 80 years. While a SUPER SENIOR CITIZEN is an individual whose age is 80 years or more.

Income Tax Act has categorized resident individuals into 3 parts-

• Individuals whose age is up to 60 years.
• Senior citizens - Individuals whose age is 60 to 80 years.
• Super senior citizens - Individuals over 80 years of age

PLEASE NOTE THAT: The CBDT has clarified that a person born on 1st April would be considered to have attained a particular age on 31st March, the day preceding the anniversary of his birthday. In particular, the question of attainment of age of eligibility for being considered a senior/very senior citizen would be decided on the basis of above criteria. Therefore, a resident individual whose 60th birthday falls on 1st April 2024, would be treated as having attained the age of 60 years in the FY 2023-24 and would be eligible for higher basic exemption limit of 3 lakh while computing his tax liability for AY 2024-25 under the old tax regime.

Likewise, a resident individual whose 80th birthday falls on 1st April 2024 would be treated as having attained the age of 80 years in the FY 2023-24 and would be eligible for higher basic exemption limit of Rs. 5 lakhs in computing his tax liability for AY 2024-25 under the old tax regime.

PLEASE NOTE THAT: Senior/Super Senior Citizens are allowed to choose whether they want to adopt the Old Tax Regime/ New Tax Regime. In New Tax Regime u/s. 115BAC there is no concept of Senior/Super Senior Citizens, all persons will be taxed on the basis of same Tax Slab.

LET'S CONSIDER TAX RATES IN OLD TAX REGIME & NEW TAX REGIME

SENIOR CITIZENS over 60 years of age have an option to pay the tax as per the old or the new tax regime. However, nonresident senior citizens are not eligible for the below mentioned tax slabs as the normal provisions of income tax are applicable to them.

If an Individual is paying tax under the new tax regime, concessional tax rates are prescribed under section 115BAC with conditions to claim exemptions, deductions and losses.

However, under the old tax regime, senior citizen individuals can enjoy unconditional claim of exemptions and deductions.

As per old tax regime, the income tax slab rates for senior citizen for FY 2023-24 (AY 2024-25) are as follows-

SUPER SENIOR CITIZENS over 80 years of age can also avail themselves of these benefits of old and new tax regime as they have the choice to opt between the two, whichever is more beneficial.

As per the old tax regime, the income tax slab rates for super senior citizen for FY 2023-24 (AY 2024-25) are as follows:

PLEASE NOTE THAT- above tax rate exclusive of SHEC @4% and Surcharge as applicable.

REVISED TAX SLAB RATES FOR ALL INDIVIDUALS IN BUDGET-2024

BENEFITS TO BE FORGONE BY THE SENIOR AND SUPER SENIOR CITIZEN IN CASE THEY AVAIL THE BENEFIT OF NEW TAX REGIME

1. Benefit of higher income exemption limit of Rs. 3,00,000 and Rs. 5,00,000

2. Leave Travel Allowance

3. House Rent Allowance (HRA)

4. Conveyance Allowance

5. Children Education Allowance

6. Daily expenses in the course of employment

7. Relocation allowance

8. Helper allowance

9. Other special allowances

10.Professional tax and Entertainment allowance

11.Interest on housing loan (Section 24) on self-occupied property

12.Deduction under Chapter VI-A such as 80C, 80D, 80E, 80TTB, etc. However, they can avail deduction under Section 80CCD(2) i.e. employer contribution to NPS, 80CCH contribution to Agniveer fund and 80JJAA i.e. deduction for employment of new employees

BENEFITS AVAILABLE TO THE SENIOR AND SUPER SENIOR CITIZEN-OLD TAX REGIME

Senior and super senior citizens are eligible to avail numerous tax benefits as offered by Income-tax Act, 1961 as are described below:

1. Higher income exemption limit

Senior citizens are required to pay tax over the income of Rs. 3,00,000 while this limit is Rs. 5,00,000 for super senior citizens under the old tax regime. This benefit is not available for ordinary individuals as the limit is Rs. 2,50,000 for them.

2. Standard deduction

If they are earning salary or pension income, they can claim a deduction of Rs. 50,000 from such income.

3. Tax rebate under Section 87A

In the case of senior citizens, if taxable income is up to Rs. 5,00,000, then they can claim a rebate from tax under the old tax regime, i.e. they are not required to pay any tax. Whereas under the new tax regime, the total income limit is up to Rs. 7 lakhs and rebate can be claimed up to Rs.25,000.

4. Higher deduction for medical insurance premium

Senior citizens can claim a deduction up to Rs. 50,000 under the old tax regime for medical insurance premium under Section 80D instead of Rs. 25,000, which is available to other individuals on the condition that it is paid through online banking channels. The same deduction cannot be claimed under the new tax regime.

5. Higher deduction in respect of expenses incurred for treatment of specified diseases or ailment

They can claim a flat deduction of Rs. 100,000 in respect of medical expenses incurred for specified diseases of self or dependent senior citizen relatives as specified in the Act under Section 80DDB.

6. Higher deduction in respect of bank and post office interest

Senior citizens taxpayers can claim a total deduction up to Rs. 50,000 in respect of interest earned from savings bank accounts, bank deposits, post office deposits or cooperative banks under Section 80TTB. While people below 60 years of age can claim deduction only up to Rs 10,000 on interest earned in savings bank account.

7. Exemption from advance tax payment

Senior citizens are not required to pay advance tax if they do not earn any income from business or profession. Therefore, no interest is levied on late payment of advance tax.

8. Benefit of Reverse Mortgage Scheme

If a senior citizen transfers his house under reverse mortgage scheme where he receives monthly installments, he is not required to pay any capital gains tax on such transfer of house.

9. Deduction on investment in Senior Citizens Savings Scheme

Senior citizens over 60 years of age can invest in the Senior Citizens Savings Scheme and save tax by claiming a deduction up to Rs. 1,50,000 under Section 80C under the old tax regime. This scheme also ensures regular as well as higher interest payouts. The same deduction cannot be claimed under the new tax regime.

WHEN ARE SENIOR CITIZENS NOT REQUIRED TO FILE INCOME TAX RETURN?

Senior citizens are not required to file income tax returns subject to the following conditions:

1. Their age is 75 years or more

2. Total income consists of only pension and interest income. Interest income can be from any account maintained with the same bank in which they receive pension. Whether this is FD or Saving Bank Account

3. They have submitted a declaration to the bank.

4. TDS is deducted by such bank under Section 194P.

BUDGET 2024 ANNOUNCEMENTS FOR SENIOR CITIZENS

Senior Citizens

• Significant progress in New Pension Scheme.
• Deduction on Family pension is enhanced from Rs 15,000 to Rs 25,000.

• Standard Deduction for pensioners increased to Rs 75,000 under the new tax regime.

LET'S DISCUSS

1. SIGNIFICANT PROGRESS IN NEW PENSION SCHEME

Finance Minister Nirmala Sitharaman on BUDGET DAY said a solution will be evolved with respect to the New Pension Scheme (NPS) that will address relevant issues and ensure fiscal prudence. Last year, the finance ministry had set up a committee under Finance Secretary T V Somanathan to review the pension scheme for government employees and suggest any changes, if needed, in the light of the existing framework and structure of the National Pension System.

Under the OPS, retired government employees received 50 per cent of their last drawn salary as monthly pensions. The amount keeps increasing with the hike in the DA rates.

The finance minister also announced measures to improve social security benefits.

PLEASE NOTE:

Towards this, she said deduction of expenditure by employers towards NPS is proposed to be increased from 10 to 14 per cent of the employee's salary.

Similarly, deduction of this expenditure up to 14 per cent of salary from the income of employees in private sector, public sector banks and undertakings, opting for the new tax regime, is proposed to be provided.

Before Budget private sector employers are allowed to deposit in NPS u/s. 80CCD (2) @ 10% of Basic Salary their employees, on other hand Government Sector employers are eligible for 14% of Basic Salary of their employees.

"NPS- VATSALYA"

The finance minister also proposed to start 'NPS-Vatsalya', a plan for contribution by parents and guardians for minors. On attaining the age of majority, the plan can be converted seamlessly into a normal NPS account.

A parent/guardian of a minor can open an NPS account and contribute regularly to the scheme, and once the minor attains majority, the account will be converted to a regular NPS account. This essentially means this is an account to save for the minor's retirement. The uptake on NPS is at 10-15 percent in the corporate segment. Further, individuals find it challenging to channel savings into retirement schemes due to high expenses and short-term goals. To expect people who themselves may not be saving for retirement to think of their children's old age is a bit much to digest.

2. DEDUCTION ON FAMILY PENSION IS ENHANCED FROM RS 15,000 TO RS 25,000

Finance minister has announced a hike in the standard deduction amount in new tax regime hiked to Rs 75000 in Budget 2024. Also, standard deduction limit for family pensioners have been hiked to Rs 25,000 from Rs 15,000.

A hike in standard deduction would mean more tax savings for salaried individuals and pensioners. The standard deduction has been hiked for the first time after five years. Last time, the standard deduction was hiked to Rs 50,000 in interim budget 2019 (effective from April 1, 2019).

PLEASE NOTE THAT: The income tax laws also allow a family pensioner having family pension to claim standard deduction under old as well as new tax regime. However, family pensioner can claim standard deduction of Rs 15,000 only.

Pension is taxable under the head salaries in your income tax return. Pensions are paid out periodically, generally every month. However, you may also choose to receive your pension as a lump sum (also called commuted pension) instead of a periodical payment.

COMMUTED AND UNCOMMUTED PENSION

Generally, the employer and taxpayer contribute together to an annuity fund, which pays the taxpayer pension out of the fund. At the time of retirement, you may choose to receive a certain percentage of your pension in advance. Such pension received in advance is called commuted pension.

For example, at the age of 60 years, you choose to receive 10% of your monthly pension worth Rs 10,000 of the next 10 years in advance. This will be paid to you as a lump sum.

Therefore, 10% of Rs 10,000x12x10 = Rs 1,20,000 is your commuted pension. You will receive Rs 9,000 (your uncommuted pension) for the next 10 years until you are 70 and after 70 years of age, you will be paid full pension of Rs 10,000.

Uncommuted pension is the pension received as periodic payments, usually monthly.

TAXABILITY OF COMMUTED AND UNCOMMUTED PENSION

1. Uncommuted pension or any periodical payment of pension is fully taxable as salary. In the above case, Rs 9,000 received by you is fully taxable. Rs 10,000, starting at the age of 70 years, is fully taxable as well.

2. Commuted or lump sum pension received by government employees is exempt from taxes.

3. Commuted or lump sum pension received by non-government employee is partially exempt depending on whether gratuity is also received by the person:

a) If a person receives both gratuity and pension - If 100% of the pension was commuted, then 1/3rd of the amount of pension is exempt and the remaining is taxed as salary.

b) If a person does not receive gratuity but receives only pension - If 100% of the pension was commuted, ½ of pension amount is exempt.

PENSION RECEIVED BY A FAMILY MEMBER

Pension received by a family member is taxed under the head 'income from other sources' in family member's income tax return.

• If this pension is commuted or is a lump sum payment, it is not taxable in certain cases.
• Uncommuted pension received by a family member is exempt to a certain extent. Rs. 15,000 or 1/3rd of the uncommuted pension received - whichever is less is exempt from tax.

For example - If a family member receives a pension of Rs 1,00,000, the exemption available is least of - Rs 15,000 or Rs 33,333 (1/3rd of Rs 1,00,000).

Thus, the taxable family pension will be Rs.85,000 (Rs 1,00,000 - Rs 15,000)

PLEASE NOTE THAT: Rs. 15,000 deduction from pension has been increased to Rs. 25,000 in this budget.

CONCLUSION

FOR SUPER SENIOR CITIZENS

1. A Super Senior Citizen is an individual resident who is 80 years or above, at any time during the previous year.

2. Section 194P of the Income Tax Act, 1961 provides conditions for exempting Senior Citizens from filing income tax returns aged 75 years and above.

Conditions for exemption are:

• Senior Citizen should be of age 75 years or above.
• Senior Citizen should be 'Resident' in the previous year.
• Senior Citizen has pension income and interest income only & interest income accrued / earned from the same specified bank in which he is receiving his pension.
• The senior citizen will submit a declaration to the specified bank.
• The bank is a 'specified bank' as notified by the Central Government.
• Such banks will be responsible for the TDS deduction of senior citizens after considering the deductions under Chapter VI-A and rebate under 87A.
• Once the specified bank, as mentioned above, deducts tax for senior citizens above 75 years of age, there will be no requirement to furnish income tax returns by senior citizens.
• Section 194P is applicable from 1st April 2021.

3. Super Senior Citizens are allowed to adopt Old as well as New Tax Regime.

4. In Old Tax Regime, various deductions and exemptions are available but in Net Tax Regime only contribution of employer @14% of the basic salary of the employee is allowed as deduction under Section 80CCD (2) of the Income tax Act, 1961.

5. The Standard Deduction for pension is increased from Rs. 15000/- to Rs. 25000/-.

6. Super Senior Citizens will get various advantages in case of investment in various government schemes, which we shall discuss in another article.

DISCLAIMER: The article presented here is only for sharing information with readers. The views expressed are of personal nature, shall not be considered as professional advice. In case of necessity do consult with tax professionals for more clarification and understanding on subject matter.