Retirees in India enjoy a great range of income tax exemption on their earnings. Government of India has already given many benefits to the retired persons with additional provision of filing income tax return on their tax-deductible income.
Hence, a retiree can actually make his taxable income very less with aprudent advance investment plans and by timely filing the income tax refund form to get maximum tax return benefits.
Is Income of a Retiree Taxable?
The income of a retiree suggests the amount of money received by him in the form of pension, either on monthly basis or as a lump sum amount on retirement. The monthly or periodical pension is called un-commuted pension which is fully subjected to tax just like regular salary. However, the lump sum amount received once at the time of retirement is called commuted pension and it can have the benefit of tax exemption.
Income Tax Return Benefits for Retirees
Four types of income tax refund forms are been generated by the Indian government, among which ITR 1 form can be the simplest form to be used by the retirees in order to obtain their income tax refund status. While choosing this form one has to consider the following things:
- This form can only be availed by the regular pensioners or salaried persons. This form is not applicable for those who have some other source of income such as business.
- People who have received Income from property can use this form.
However, lump sum earnings from lottery cannot be fit into this ITR 1 form.
Tax Calculation on Retirees
While mentioning retirees people usually mean to the senior citizens or to those who are above 60 years old. Retirees do not include those who have taken voluntary retirement prematurely from their jobs. Income tax slab for people above 60 years old is as follows:
- No tax is imposed on an annual income maximum 3lakhs.
- Tax imposed on annual income in between 3-5lakhs is 10%.
- Tax imposed on annual income in between 5-10lakhs is 20%.
- While tax imposed over annual income over 10lakhs is 30%.
Tax slab of senior people of age 80yrs and more is:
- No tax is imposed on an annual income up to 5lakhs.
- 10% tax is applicable on annual income 5-10lakhs.
- 20% tax is imposed on an annual income above 10lakhs.
Other Tax Deduction from A Retiree
- TDS – any and every salary payment made by the employer deducts certain amount of tax as TDS before the payment. This tax is also deducted from the pension amounts of retirees. However, the pension money received by the family of the retiree is not subjected to TDS deduction.
- Surcharge tax – in case the annual income of the retiree exceeds 1crore then certain amount of surcharge tax is deducted from the pension amount.
- Education tax – about 1-2% of education tax is imposed on the pension amount received by a retiree. This is also an extra charge besides income tax.
3 Best States for Income Tax Refund Status on Retirees
However, there are ways to receive more tax deduction benefits for income tax refund status of a pensioner. They are:
- Section 88 – the pensioner or his family can ask for more tax deduction in this section by showing their expenses and liabilities such as education fees of children, insurance fees, home loan repayments or other investment expenses. These factors can receive maximum exempt of 10thousand rupees. However, these benefits can be availed only by those whose annual income is less than 5lakhs.
- Section 88B – tax rebate up to 20 thousand can be received by senior person 65years old age.
- Section 89-1 – if the pension is received as arrears, the pensioner enjoys certain sum of tax benefit within this section. The pension holder needs to file 10E form in that case.
Other Income Tax Refund benefits of a retiree are:
- The income accepted by the retired members of UNO and their family receive tax exemption.
- Tax exemption is also received by the judges of supreme and high courts on their half-commuted pensions.
- Tax exempt can be received on the earnings of Public Provident Fund. The maturity amount of PPF is also free from tax.
- 10-18-I – people who received any gallantry awards can have tax exempt within this section.
- 10-18-I – the family of a person who received any gallantry awards can also have tax exempt in this section.
- 10-19 – the family members of any deceased person who worked in armed forces of India, also receive tax exemption in this section.
Therefore, being a retiree or a pensioner you just need to know the best conditions for income tax refund status when you can carefully check out your tax saving plans and tax return plans as well.