Union Budget: In this year’s Budget, Union Finance Minister Nirmala Sitharaman announced relief for taxpayers in the New Tax Regime by raising the Standard Deduction limit from Rs 50,000 to Rs 75,000. The revised tax slabs for the New Tax regime, applicable from April 2025, will allow salaried employees to save up to Rs 17,500 in income tax.
However, senior citizens were not included in this relief. A query was recently raised in Lok Sabha by a parliamentarian regarding potential tax relief for senior citizens. Eatala Rajender, Member of Parliament from Malkajgiri Lok Sabha constituency, inquired whether the Finance Ministry plans to introduce tax revisions that would offer a tax rebate for senior citizens with annual incomes up to Rs 7.5 lakh, and impose a 5% income tax on incomes between Rs 7.5 lakh and Rs 10 lakh.
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The question did not clearly indicate whether it was regarding the Old Tax Regime or the New Tax Regime. It is likely that the relief being requested was under the Old Tax Regime, considering that the New Regime already exempts annual income up to Rs 7.5 lakh from taxes. Furthermore, the inquiry proposed an adjustment to the current deduction limit for investments in National Savings Certificates (NSC) from Rs 1.5 lakh to Rs 3 lakh specifically for senior citizens.
Government’s response
Minister of State Finance Pankaj Choudhary noted that the ministry reviews multiple proposals for amendments to the Income Tax Act, 1961, as part of the annual budget process. Currently, there are no such proposals being considered by the ministry.
The Minister was responding to the following three questions:
> Have States Elders’ Welfare Associations sought an income tax revision for senior citizens from the current fiscal year?
> Will the government proposes to provide a tax rebate to senior citizens till annual income of Rs 7.5 lakh, and to levy 5 per cent income tax up to annual income of Rs 10 lakh?
> Will the tax deduction for the national saving certificate investment for senior citizens be revised from Rs 1.5 lakh to Rs 3 lakh from this fiscal year?
Govt’s proposal
The proposals under consideration for this year will not be implemented, but the discussion has underscored the urgency for future reforms. Senior citizens and stakeholders will be monitoring closely the Budget 2024 for any unexpected developments addressing their concerns. By examining this calculation, we can determine the income tax a senior citizen earning Rs 10 lakh annually will pay under the previous tax regime.
Income tax slabs for senior citizens
Deductions and Tax Calculation:
Standard Deduction: Rs 50,000
Section 80C Deduction (Investments in PPF, LIC, etc.): Rs 1,50,000
Section 80D (Health Insurance Premium): Rs 25,000
Total Deductions: Rs 2,25,000
Taxable Income: Rs 10,00,000 – Rs 2,25,000 = Rs 7,75,000
Tax Calculation:
Up to Rs 3 lakh: Nil (as individual is a senior citizen)
Rs 3 lakh – Rs 5 lakh: 5% of Rs 2 lakh = Rs 10,000
Rs 5 lakh – Rs 7.75 lakh: 20% of Rs 2.75 lakh = Rs 55,000
Total Tax: Rs 65,000
New Tax Regime
In the New Tax Regime, individuals with income up to Rs 7 lakh are eligible for a rebate u/s 87A, resulting in a tax liability of Nil. Additionally, under this regime, a Standard Deduction provision of Rs 75,000 is applicable, further reducing the tax liability to zero for individuals earning up to Rs 7.75 lakh per year.
Tax slabs for New Tax Regime to be implemented from April 1, 2025
Here are new tax slabs the New Tax Regime
Rs 0-3 lakh: Nil (unchanged)
Rs 3-7 lakh: 5% (vs 5% for Rs 3-6 lakh before)
Rs 7-10 lakh: 10% (vs 10% for Rs 6-9 lakh before)
Rs 10-12 lakh: 15% (vs 15% for Rs 9-12 lakh before)
Rs 12-15 lakh: 20% (unchanged)
Above Rs 15 lakh: 30% (unchanged)