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What is the tax liability for a senior citizen?


My last year’s income from pension was 5,31,910 and the interest from bank accounts was 2,16,883. As for exemptions under the income-tax Act, I am eligible for the following deductions: 3 lakh exempt limit for senior citizens, 1.5 lakh for investing in public provident fund (PPF), 50,000 for mediclaim, and 50,000 under Section 80TTB, besides the standard deduction of 50,000. Hence my net taxable income is 148,793, which means that I do not need to pay any income tax. But after filing the income tax return, the acknowledgement printout shows the following:

Total income of 4,48,793 and adjusted total income under AMT, where applicable, is 4,48,793

Although, I received a refund of 27,750, I am unable to figure out the tax calculation. Please help me understand the tax computation.

—Name withheld on request

Based on the limited facts provided by you, it is assumed that you qualify as a resident senior citizen (aged 60 years or above during the relevant financial year) and you have not opted for the new tax regime.

During the year, we assume that you have earned pension income from your employer along with interest from bank deposits. Further, during the year you have made investments/ payments as specified in your query, which are eligible for deduction under Chapter VI-A of the Income-tax Act, 1961.

Thus, based on the facts provided by you, we have summarized below the sample computation of your total income:

A. Income under the head salary: 481,910 (which is pension income of 5,31,910 less standard deduction of 50,000)

B. Income from Other Sources: 216,883 (which is the interest generated from bank accounts)

C. Gross Total Income (A + B) equals 698,793 (which is 481,910 plus 216,883.)

D. Less: Deduction under Chapter VI-A: 2.5 lakh

This includes deduction under section 80C ( 1.5 lakh for PPF), deduction under section 80D ( 50,000 for mediclaim) and deduction under section 80TTB ( 50,000 for bank interest.)

E. Total Income / Net Taxable Income (C –D) is 448,793 ( 698,793 less 250,000)

As per the above, the total income/ net taxable income is 448,793, which is also reflecting in the computation of income schedule in your ITR,

It is to be noted that the exemption of 3 lakh mentioned by you, is not a deduction from your taxable income. It is only the prescribed income threshold (for a resident senior citizen), up to which the tax liability will be calculated as nil.

For net taxable income between 3 lakh and 5 lakh the applicable tax rate is 5%. However, where the net taxable income is below 5 lakh (in your case 448,793), a rebate is available under section 87A of the Act, up to 100% of the tax or 12,500 whichever is lower. This results in no tax liability on taxable income up to 5 lakh.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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