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September 26, 2020

When senior citizens are not required to file their ITR?

by shivam jaiswal in Income Tax

When senior citizens are not required to file their ITR?

In India majority of older persons face financial hardship in old age as most of them are not in a position to earn their livelihood. Their savings, if any, are not enough to meet their day to day, particularly the medical expenses. Older persons with good net-worth value are in search of good short-term financial planning to earn a good income from their finance. The Income Tax law provides various benefits to senior citizens in India with the view to mitigate their issues.

Who is considered as a Senior Citizen in India?

According to the law, a senior citizen is an individual resident between the age group of 60 to 80 years, as on the last day of the previous financial year.

Who is considered as a Super Senior Citizen in India?

A super senior citizen is an individual resident who is above 80 years, as on the last day of the previous financial year.

Just because a senior citizen has been filing an ITR all his life does not necessarily mean that he/she is mandatorily required to file an ITR. Many a times, senior citizens continue filing their ITR’s even when they are not required by law. This may happen due to misinformation, fear of income tax penalties, lack of knowledge etc. Given below are certain situations where a senior citizen will not be required to file their ITR.

No taxable income after turning 60

The basic tax exemption limit for normal citizens below 60 years of age is Rs 2.5 lakh in a financial year. But for Senior Citizens, the exemption limit is Rs 3 lakh, while for Very Senior Citizens, the limit is Rs 5 lakh.

So, a Senior Citizen doesn’t have to pay any tax or file ITR in case the annual income is up to Rs 3 lakh and no TDS is deducted during the financial year. Similarly, a Very Senior Citizen is exempted from paying tax and filing ITR if his/her annual income is up to Rs 5 lakh and no TDS is deducted.

Pension is below the exemption limit

Retirement age is the age at which a person is expected or required to cease work and is usually the age at which they may be entitled to receive superannuation or other benefits. In India, generally people retire when they reach the age of 60 to 65 years after which they receive benefits such as pension, which is taxable under Income Tax.

With a pension, the employer guarantees an income in retirement. Employers are responsible for both funding the plan and managing the plan’s investments. Not all employers offer pensions, but government organizations usually do.

Essentially, on retirement, if the employee opts for commutation of pension, a portion is paid as a lump sum to the pensioner while on the balance the pension begins. In simple terms, commutation means a lump sum payment in lieu of periodic payments of pension. In such a case, the amount of pension will be lower than the amount of pension without any commutation.

This would lead to situations where your pension income falls below the basic exemption limit i.e not taxable and hence not liable to file ITR. Therefore, it is important to remember that even if your salary income exceeded the basic exemption limit (making you liable to file your ITR), it does not mean that your lower pension also exceeds the limit. Verify if your pension exceeds the basic exemption limit. There are chances that you would not be liable to file your ITR in case they do not.

Know Basic Exemption limit for Senior Citizens and Super Senior Citizen in India for FY 2019-20 and FY 2020-21

Filing an ITR depends upon nature of income

The ITR form applicable to a taxpayer is dependent on the type of taxpayer, whether individuals, HUF, company, etc., the nature of income and total income. You will not be required to file an ITR if you do not have taxable income under the 5 heads of income tax. To make an income chargeable, it should be under at least one of the five income heads:

  • Salary Income
  • House Property Income
  • Profits or Gains from Business or Profession
  • Capital Gains
  • Income from other Sources

For instance, suppose Mr A had properties from which he was earning rent. The same was taxable under the head ‘Income from House Property’. Mr A had no other source of income. In the current year, Mr A sold all his properties and was liable to pay capitals gains tax. He will file ITR in the current year declaring income under the head ‘Capital Gains’ and Income from House Property.’

However, from the subsequent year as Mr A will have no properties and thus no taxable income. Therefore, he will not be liable to file his ITR.

Senior citizens also receive a number of other benefits under Income Tax Provisions such as:

  • Deduction under Section 80TTB of Interest free Income
  • Additional Deduction under Section 80D
  • Additional Deduction under Section 80DDB
  • Senior citizens are free from burden of paying advance tax unless they make income under the head ‘Profits and Gains from Business or Profession’.
  • Super Senior Citizens (individuals above 80 years) can file for their Income Tax Return through either ITR-1 (Sahaj) or ITR-4 (Sugam). They can choose to do it either manually or electronically, while no other assessee can file Offline Returns.

Thanks to attractive tax deductions and benefits, the Income Tax Law has provided an advantageous position for senior citizens in India.

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