• Jan
  • 24
  • 2012

Income Tax Provisions related to Pensioners, Senior Citizens and Super Senior Citizen

1.  PENSION

Pension is described in section 60 of the CPC and section 11 of the Pension Act as a periodical allowance or stipend granted on account of past service, particular merits etc. Thus monthly allowance to the younger brother of a ruler was treated as a maintenance allowance and not pension (Raj Kumar Bikram Bahadur Singh Vs. CIT 75 ITR 227(MP)). There are three important features of ‘pension’. Firstly, pension is a compensation for past service. Secondly, it owes its origin to a past employer-employee or master-servant relationship. Thirdly, it is paid on the basis of earlier relationship of an agreement of service as opposed to an agreement for service. This relationship terminates only on the death of the concerned employee.

Pension received from a former employer is taxable as ‘Salary’. Hence, the various deductions available on salary income, including relief u/s 89(1) for the arrears of pension received would be granted to pensioners who received their pension from, a nationalised bank and in other cases their present Drawing & Disbursing Officers. Similarly, deductions from the amount of pension of standard deduction and adjustment of tax rebate u/s 88 and 88B shall be done by the concerned bank, at the time of deduction of tax at source from the pension, on furnishing of relevant details by the pensioner. Instructions in above regard were issued by R.B.I. ’s Pension Circular (Central Service No. 7/C D.R./ 1992(Ref. No. DGBA:GA(NBS) No. 60/GA64-(II CVL-91-92 dated 27.4.92).

Pension to officials of UNO is exempt from taxation. Section 2 of the UN (Privilege & Immunities) Act, 1947 grants tax exemption to salaries/emoluments paid by U.N. The Karnataka High Court had held that u/s 17 of the Income Tax Act, salary has been defined as including pension, therefore, if salary received from U.N. is exempt, so shall be the pension. This decision was accepted by the CBDT vide circular No. 293 dated 10.02.1981.

2.  FAMILY PENSION

Family pension is defined in Section 57 as a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of death. Pension and family pension are qualitatively different. The former is paid during the lifetime of the employee while the latter is paid on his death to surviving family members. However, in case of family pension, since there is no employer-employee relationship between the payer and the payee, therefore, it is taxed as ‘Income from Other Sources’ in the hands of the nominee(s). In respect of family pension, deduction u/s 57(iia) of Rs. 15000 or 1/3rd of the amount received, whichever is less, is available.

3.  SENIOR CITIZEN

Under the Income Tax Act, a senior citizen is a person who at any time during the previous year has attained the age of 65 years or more (Age Limit been reduced to 60 Years from A.Y. 2012-13). There are certain benefits available to senior citizen under the Income Tax Act:-

(i) Tax rebate u/s 88B: Rebate under this section to the extent of Rs.20,000/- was available to all senior citizens whether they are pensioners or self employed or traders etc.

It may be noted that no rebate u/s 88B is available from A.Y.2006-07 onwards. However, the maximum amount not chargeable to tax in respect of senior citizens has been increased to Rs.2,40,000 w.e.f. A.Y. 2010-11. Thus, no tax is payable by a senior citizen if the total income is upto Rs.2.4 lacs for the A.Y. 2010-11.

(ii)           Benefits provided by Finance Act 2007: The deduction available u/s 80D for medical insurance premium paid is to be increased to Rs.20,000 for senior citizens. Secondly, the deduction available u/s 80DDB in respect of expenditure incurred on treatment of specified diseases is to be increased to Rs.60,000 for senior citizens.

(iii)          In order to resolve the tax issues arising out of the reverse mortgage scheme introduced by the National Housing Bank (NHB), the Finance Act 2008 has added a new clause (xvi) in Section 47 of the I.T. Act which provides that any transfer of a capital asset in a transaction of reverse mortgage under a notified scheme shall not be regarded as a transfer and shall, therefore, not attract capital gains tax. This ensures that the intention of a reverse mortgage which is to secure a stream of cash flow against the mortgage is not contradicted by treating the same as transfer.

The second issue is whether the loan, either in lump sum or in instalments, received under a reverse mortgage scheme amounts to income. Receipt of such loan is in the nature of a capital receipt. However, with a view to providing certainty in the tax regime pertaining to the senior citizens, the Finance Act 2008 has amended section 10 of the Income Tax Act to provide that such loan amounts will be exempt from income tax.

Consequent to these amendments, a borrower, under a reverse mortgage scheme, will be liable to income tax (in the nature of tax on capital gains) only at the point of alienation of the mortgaged property by the mortgagee for the purposes of recovering the loan.

These amendments will take effect from the 1st day of April, 2008 and will accordingly apply in relation to assessment year 2008-09 and subsequent assessment years.

4. SUPER SENIOR CITIZEN

Under the Income Tax Act, a Super senior citizen is a person who at any time during the previous year has attained the age of 80  years or more ( Category introduced from A.Y. 2012-13). There are certain benefits available to senior citizen under the Income Tax Act:-

(i) maximum amount not chargeable to tax in respect of senior citizens for A.Y. 2012-13 is Rs. 5,00,000/-. Thus, no tax is payable by a Super senior citizen if the total income is upto Rs.5  lacs for the A.Y. 2010-11.

(ii) All benefit discussed in point (ii) & (iii) above for Senior Citizens are also available to Super Senior Citizens.

Income Tax Slab for Senior Citizen and Super Senior Citizen For A.Y. 2012-13

Total Income / Income Slab

Senior Citizen
(Age Limit 60 & above)

Super Senior Citizen
(Age Limit 80 & above)

Income tax rate

Education cess

Total Income tax rate

Income tax rate

Education cess

Total Income tax rate

0-180000 Nil Nil Nil Nil Nil Nil
180001-190000 Nil Nil Nil Nil Nil Nil
190001-250000 Nil Nil Nil Nil Nil Nil
250001-500000 10.00% 3.00% 10.30% Nil Nil Nil
500001-800000 20.00% 3.00% 20.60% 20.00% 3.00% 20.60%
800001& above 30.00% 3.00% 30.90% 30.00% 3.00% 30.90%


22 Responses to “Income Tax Provisions related to Pensioners, Senior Citizens and Super Senior Citizen”

  1. manoj sehgal says:

    my income from pension is 260000.Can i avail 2000 rebate as applicable to as my pension is less than 5 lakh. is 2000 rebate is applicable to pensioners also
    please clarify

  2. BHARAT T KATE says:

    MAY I CLAIM STANDARD DEDUCTION OF 2,50,000/- OF SENIOR CITIZEN DURING F.Y.2012-13 SINCE MY DATE OF BIRTH IS 25/04.1952

  3. BHARAT T KATE says:

    MY DATE OF BIRTH IS 25TH APRIL 1952 . CAN I CLAIM STD. DEDUCTION OF RS.2,50,000/-AS PER I.T.ACT DURING F.Y.2012-13 I.E. ASS.YR.2013-14 AS SENIOR CITIZEN OF 60 YERAS

  4. BHARAT T KATE says:

    MY DATE OF BIRTH IS 25TH APRIL 1952 CAN I CLAIM STANDARD DEDUCTION OF SERIOR CITIZEN 0E RS. 2,50,000/- DURING ACCOUNTING/FINANCIAL YEAR 2012-13 I.E. ASS. YR.2013-14 -BHARAT KATE

  5. r.s.gour says:

    i am pensioner from central gov. civil category.no income from any other source. annual pension is slightly above rs.25000/-getting through sbi guna (mp). pension releasing sbi branch deducted tds.i having full saving up to rs.100000/-.i am repaying house loan emi rs.6000/-p.m.in the same sbi branch.bank didn’t asked me for saving details at the time of tds. for year 2012-13. what should i do where as per rules advance tax is not mandatory in my case.please advise.

  6. RameshKuruganti says:

    Dear Experts Connected with Income Tax and Human Resources!

    Kindly Enligheten me abt the below given queries:

    1) Is there any rule/law of Any Indian Govt. Department, which prohibits employment of Persons aged 65 Yrs and above, on regular Salary basis, if the Private Company Owners/Management and the Senior Citizen mutually agree to employ and be employed respectively?

    2) PF deducyion is Manadatory, irresoective of Age and Salary Drawn?

    3)Is there any Rule prohibiting Employment of any Experienced Individual(especially Senior Citizens) on Consolidaated salary basis? That is without Categorising the emoluments under the Sub Heads of Basic Salary/House Rent Allowance /DA ETC ETC?

    I am prepared to pay any reasonable fees, if te replies are given, quoting the relevant Rules/Regulations/Acts etc

    Regards.
    K.Ramesh
    E Mail ID rameshkuruganti2010@gmailcom
    Mobile Phone:+919949788012

  7. A K Bhat says:

    getting gross pension 25000 including commutition 2500 consump loan 5200 am i taxable when i have an ins poll with SA 2.5lac paid ist inst 25000 in dec 2012

  8. srinivas Gn says:

    My mother is getting pension of 4800 PM and also
    Deposited in Bank 400000.
    will she be eligile for furnshing form 15H.

  9. Yogesh says:

    Dear Saxena please read the article carefully. The first para mentions.

    Under the Income Tax Act, a senior citizen is a person who at any time during the previous year has attained the age of 65 years or more (Age Limit been reduced to 60 Years from A.Y. 2012-13)

  10. n k sharma says:

    sir,
    I am retiring in the month of January-2013
    Will my pay will be calculated for the purpose of Income Tax as Sr. Citizen in the month of January-2013 ?
    my date of birth 21/1/1953
    Please clarify for the fin. year 2012-13.

  11. Yes Sir, You can claim

  12. BHARAT KATE says:

    MY DATE OF BIRTH IS 25TH APRIL 1952 CAN I CLAIM FOR STANDARD DEDUCTION OF RS. 2,50,000/- FOR ACCOUNTING YEAR 2012-2013 AS PER I.T.ACT

  13. BHARAT KATE says:

    MY DATE OF BIRTH 25TH APRIL 1952 CAN I CLAIM FOR STD. DEDUCTION 0F 2,50,000/- FOR ACCOUNTING YEAR 1012-2013

  14. ramani iyer says:

    current age 84 yrs. Own house resident since 1984 bought at 5 L. wishes to sell at 60 L. What are my tax obligations? At this age i wish to invest the entire proceeds in normal bank Fixed Deposits.

  15. My date of birth is 01-04-1932.
    Can I claim the super senior citizen benefit regarding exemption limit of Rs. 5L for the financial year 2011-2012

  16. mahadevan says:

    what about the new category of  super senior citizens?

  17. HIRANMOY BANERJEE says:

    I am Central Government Pensioner and widower residing in a rented Flat in Chennai to look after my children. . I own one flat in Kolkata, but it is kept under lock and key, not rented. Can I claim deductions for house rent paid by me from my Pension Income. I was not advised earlier in this regard and have never claimed deduction. If the answer to my first point is ‘yes’, can I file revised returns for earlier years claiming deductions for house rent paid as admissible.

  18. admin says:

    Yes the same is 60 Years from A.Y. 2012-13

  19. Jai Pal Garg says:

    I think the age for Senior Citizen has been reduced to 60 years in the Financial year 2011-12 i.e. Assessment year 2012-13.Please clearify.

  20. HIRANMOY BANERJEE says:

    My date of birth is 21.06.1947. I am a Pensioner of the Central Government Service. Kindly clarify whether the CBDT circular No. 293 dt. 10.02.1981 quoted above accepting Karnata High Court Judgment u/s. 17 of the IT Act stating that Pension from UN is not taxable, is applicable to all pensions or only for the pension from UN.

  21. CA. subhash Chandra Podder says:

    Nothing to comment in this country. Simple things are making complex in all sections of regulators .getting fade up. Government / Politicians are trying their level best to retain their seats in respective Constituencies and ensure their monthly Allowance /salary / gratuity / Pension etc. making Public / masses AMM Admi are not full. Early General Election with no majority of any party is round the corner 2012/ 2013/ March 2013. by this time loot every one.
    CA subhash Chandra Podder
    Kolkata
    24/01/2012

  22. Dr AK Saxena says:

    as per my information , the age limit for being a senior citizen under income tax act is now 60 yrs, whereas in this article., it is written as 65 yrs. please clarify.
    thanks
    dr ak saxena

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