New Tax Regime: Senior Citizens at par with others
[Query 1]
Sr. citizens are always in dilemma whether to opt for New tax regime (NTR) or Old tax regime (OTR) during any Assessment period before filing ITR. Kindly arrange to clarify followings for facilitating senior citizens below 70 years and beyond 70 years:-
1. Can senior citizens change the regime of options every assessment year? If yes, what would be conditions to comply and any specific rider to satisfy?
2. How would this be treated differently for taxation purposes, for salaried class, Superannuated/ retired employees and Business class individuals?
3. What is the tax slab for senior citizens in OTR Vs NTR?
4. Whether senior citizens should opt for NTR or OTR? [S.K. Saha –saha605325@gmail.com]
Opinion:
Many taxpayers are confronted with the challenging decision of choosing the most advantageous tax regime under the income tax law. The major differences between the Old Tax Regime (OTR) and the New Tax Regime (NTR) are the different Tax slab, different tax rates and admissibility of various exemption & deductions. OTR allows taxpayers to enjoy a plethora of exemptions and deductions aimed at bringing down their taxable income whereas NTR restricts the deduction and exemption.
1. Basic exemption limit in OTR & NTR
a) For senior citizens, the basic exemption limit is Rs. 3 Lakh. It is the same irrespective of whether the senior citizen is opting for OTR or NTR.
b) For super senior citizens aged 80 years and above, the basic exemption limits are different in both the tax regimes. Under the OTR, a super senior citizen is eligible for a basic income exemption limit of Rs 5 lakh whereas it is Rs. 3 Lakh only in the NTR. In short, there is no special benefit to senior citizens in the NTR.
c) NTR has introduced a standard deduction of Rs 50,000/- for pensioners & salaried taxpayers. Thus, a pensioner citizen may benefit more by Rs. 50,000/- under the NTR.
Tax Rate under OTR Vs. NTR:
a) The tax rate and slab under the NTR is as under:
| Total Income (Rs) |
Rate |
| Up to 3,00,000 |
Nil |
| From 3,00,001 to 6,00,000 |
5% |
| From 6,00,001 to 9,00,000 |
10% |
| From 9,00,001 to 12,00,000 |
15% |
| From 12,00,001 to 15,00,000 |
20% |
| Above 15,00,000 |
30% |
b) For senior citizens, the tax rate under the OTR is 5% for income between Rs. 3 Lakh to 5 Lakh, 20% for income between Rs. 5 Lakh to 10 Lakh & 30% for income above Rs. 10 Lakh. For super senior citizens, the tax rate is 20% for income between Rs. 5 Lakh to 10 Lakh & 30% for income above Rs. 10 Lakh.
3. Increase of Tax Rebate limit to Rs. 7 Lakh:
Higher tax rebate is now available for the taxpayers opting for NTR as the same has been raised from Rs. 12,500/- to Rs. 25,000/-. In essence, now all senior citizens earning up to Rs. 7 Lakh are exempt from paying tax & will not be required to pay a single penny under the NTR. Since the limit of rebate has been increased and not the basic exemption limit, there is no immunity from the process of filing income tax return for such taxpayers. Further, senior citizens in receipt of pension income up to Rs. 7.50 Lakh will have zero tax liability in view of standard deduction of Rs. 50,000/-.
4. Which regime is better for Senior Citizen:
a) The choice of the tax regime will be dependent on each & every individual case. Even though the NTR is simple to follow, it will still be worthwhile to do the mathematics before opting for it.
b) The choice of the right tax regime would primarily be dependent on the following factors:
i) Income slab of every individual.
ii) Extent of exemptions and deduction available with the taxpayers.
iii) Alternate investments options & returns thereon if taxpayers prefer not to opt for the new regime.
iv) Short term and long term financial goals of the citizen.
In general, most of the senior citizens may not have many exemptions/ deductions for saving tax and so, in my view, the majority may prefer the NTR. However, taxpayers may make the tax calculation before opting for any particular tax regime.
5. Option to Change the Tax Regime:
If senior citizens are having income from business or profession then only once switch during the lifetime is permissible between OTR Vs. NTR. But if the senior citizen doesn’t have income from business/ profession then the taxpayers will have free entry and exit every year in any tax regime without any restrictions.
[Query 2]
My Daughter is not the Income tax return filer. There is a FDR in the banks in her name. Amount for FDR was gifted by me. The bank has deducted TDS without taking form No. 15G or taking confirmation from me. Please guide regarding this. I don’t want to file her return now since she is still a Student.
Opinion:
1. Major Daughter:
If your daughter is major, the only option to get the refund is by filing the income tax return as the TDS has already been done on her interest income. The bank is right in doing the TDS if the depositor has not furnished Form No. 15G / 15H before doing the TDS. Now, she can submit Form No. 15G for the FY 2024-25 so as to avoid the TDS in the current year.
2. Minor Daughter:
If your daughter is minor then she need not file her income tax return as her income would be required to be clubbed with the income of the parents. TDS credit of the minor can be claimed by those in whose hands the income is clubbed.
[Query 3]
In the earlier issue of The Tax Talk, you have mentioned that the relaxation has been provided against short deduction demand raised due to non-linking of PAN with aadhar if the same is done any time before 31.05.2024. Kindly guide whether we need to file the revised TDS return for this or any application is required to be filed for nullifying the demand? [JASPL]
Opinion:
No application or revised TDS return is required. The system will reprocess previously filed TDS returns and nullify the demand if PAN and Aadhaar are linked by 31.05.2024.
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]
