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CBDT tweaks Income Tax rules for Senior Citizens

CBDT tweaks Income Tax rules for Senior Citizens

Tag: GS 3 || Economy || Public Finance || Taxation

Why in news?

  • CBDT has tweaked Income Tax rules for Senior Citizens.

Form 15 H

  • The CBDT has revised the rules applicable in case of filing of Form 15 H. The new rule applicable for the financial year 2019-29 takes into account the provision of section 87A and thus allows even those taxpayers who are eligible for rebate under Section 87A.
  • Declaration: The Form 15 H is a declaration under section 197A(1C) of the Income Tax Act, to be made by an individual who is of the age of sixty years or more claiming certain incomes without deduction of tax, i.e. TDS.
    • Such a form needs to be submitted to any institution such as a bank which deducts TDS if interest income exceeds Rs 50,000 a year ( Rs 40,000 for non-senior citizens).
    • There is no change for those required to fill Form G is the declaration form for no senior citizens for claiming certain incomes without deduction of tax.

Section 87A

  • The new rule will benefit those senior citizens whose tax liability will be Nil after allowing rebate under Section 87A.
  • According to the income tax rules, Section 87A states that:
    • “An assessee, being an individual resident in India, whose total income does not exceed Rs 5 lakh, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions) on his total income with which he is chargeable for any assessment year, of an amount equal to 100% of such income-tax or an amount of Rs 12,500, whichever is less.”
  • The benefit of Section 87 A is available to assessee only when these three conditions are met in the financial year 2019-20 –
    • Firstly, it is only for resident individuals,
    • secondly, the total income after taking into account any deductions, has to be below Rs 5 lakh and
    • thirdly, the maximum rebate allowed will be Rs 12500.

New rules

  • CBDT has notified that the Form 15H declaration will cover the Section 87A rebate.
    • The new income tax rule provides that –
      • the declaration in Form 15H can be accepted from the person whose income is higher than the basic exemption limit, i.e. Rs 3 lakh (as 15H is applicable to persons aged above 60 years),
      • but is eligible for Section 87A rebate where tax liability will be nil after taking in account Section 87A.
    • A senior citizen is granted a higher exemption limit compared to non-senior citizens. The exemption limit for the financial year 2019-20 available to a resident senior citizen is Rs. 3 lakh.
      • It means the assessee whose income is above the exemption limit but is eligible for rebate under Section 87A and where the tax liability is nil, may still file the Form 15H.

Mains question

  • What are the new income tax rules for Senior Citizens?