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%
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Tags : income tax act 1961 (272)

38 responses to “Taxation of Pensioners, Senior & Super Senior Citizen”

  1. SHASHI KANT says:

    Sir
    I am a retiree from HVPN/HSEB and Senior citizen of 72 years getting pension from SBP.
    AS per Income tax department Section 207 I am exempt from paying Advance tax. But Bank have started dedudcting tax from my pension inspite my objection. You are requested to help me.
    With warm regards
    9416046227

  2. Vinod Bala says:

    I am a central govt emplyee and going to retire on 31st May 2017. I want to tranfer 50 percent of my retirement benefits to my husband whose monthy pension is rs. 900 only. Can i do it to save tax.

  3. grkraj says:

    I have saved Rs 11 lackhs in Banks as fixed deposits, Rs75000 as 5 year term deposits, Rs2,00,00 in post office savings. How much benifits i get

  4. Blossom Hackett says:

    My mother age 74, is drawing a Family pension from the railway amount of 10,500 per month. She has a Pan card , but has never filed returns, could you please advise what kind of Tax payment should she be filing ?

  5. Jayalakshmi says:

    I have a query are psychiatric persons exempted from tax

  6. Jayalakshmi says:

    I have a doubt sir. I am 76 years old. My income for the past few years is in tax paying slab. I am having psychiatric problem regularly taking medicines am I eligible for tax exemption any section relating

  7. v sukumaran says:

    i had retired on 2012 march 20 i had been victimized by the employer not having any retirement tax benefit. at the last moment they rendered making payment 47170/ at the last 23rd march with a deduction of 4462/ as income tax whether i can get tax rebate please clarify

  8. Parmjit Singh Bhamrah says:

    Under which section of IT Act 1961,senior citizen need not deposit advance income tax.He can assess his income tax himself and not required to pay income during the financial year concerned,he can deposit his assessed income tax in bank before filling his return of income in the concerned assessment year.

  9. xavier raj says:

    I am aged about 73…iam a state govt. pensioner… last year my pension is crossed the income tax slap limit..including arrears… my question is arrears is taxable ? please clarify.. thanks

    • Dineshan P says:

      Iam aged 61 years and a service pensioner.Now Iam getting other income from a contract basis posting.Let me know I want to pay income tax in advance?,if so how to make the payment?

  10. P J THULAGAR says:

    NOW I AM 66 YEARS I WANT SALES MY LAND AT TIRUCHY I AM ELIGIBLE FOR IT. LAND VALUE 30,000/- GOVERNMENT RATE. PL SUGGEST ANY RULES WITHOUT PAY THE IT. PLEASE SUGGEST YOUR RULES. I WANT DISBURSE MY AMOUNT TO DAUGHTER.SON AND MYSELF IN FDR

  11. Lekhasekhara Naik says:

    Sir, I am a pensioner, getting Rs 25,000/-.I retired on 31 Jul 2014.Presently I am staying in a rented house costing Rs 8500/-per month. Can I get income tax rebate on house rent. If yes, what I have to do?

    Regards,

  12. M.S.Vaidya,former Judge of Bombay High Court says:

    Apropos my query re allowances to High Court Judges,some more facts are relevant:1.The allowance is not paid by any pension authority not does it reflect in payslip
    2.Sanctioned by Govt of Mah. not under their usual pension head accounts but under the account head of High Court expenditure
    3.It is paid by the Deputy registrar of the High Court through bank(e.g.state bank of Hyderabad for Aurangabad)on acquiring through the judges information from the concerned judges individually
    4.In a way the allowance is expenditure incurred by the High Court for facilities mentioned in Resolution of Govt of Mah.

  13. M.S.Vaidya,former Judge of High Court says:

    Govt of maharashtra has allowed Rs 12000 p.m. as allowance for secretarial and other matters wef July 2014 to the retired Judges of Bombay High Court. Will this be chargeable for income tax?

  14. satyanarayana says:

    I am a retired state govt employee and received retirement gratuity leave encashment commuted value of pension LIc etc under what section or rule I can claim exemption of tax

  15. k m viswanath says:

    are the monthly pensions from L I C ‘s JEEWAN SURAKHA , VARISHT BHIMA PENSION YOJANA exempted from income tax

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