Tax Exemption for Seniors: Understanding the Real Income Tax Rule

A viral message claimed that senior citizens aged 75 and above no longer need to pay income tax or file returns. The message suggested this exemption was a government initiative for India’s 75th Independence anniversary. However, the PIB Fact Check unit confirmed this claim is false.

What Did the Message Say?

The message spread on platforms like WhatsApp. It stated that senior citizens living on pension or similar incomes would not be taxed or required to file returns. It claimed that updates to income tax rules, such as changes to Rule 31, Rule 31A, Form 16, and Form 240, made this possible. The message also mentioned a specific form (12-88A) to be submitted at the bank for exemption.

PIB Fact Check refuted this on social media. “A message circulating on social media claims that as India commemorates 75 years of Independence, senior citizens above 75 years of age will no longer have to pay taxes. This claim is fake.”

What Does the Law Actually Say?

According to Section 194P of the Income Tax Act, 1961, senior citizens aged 75 and older may be exempt from filing returns under specific conditions. These rules took effect on April 1, 2021. However, the exemption does not apply to all individuals in this age group.

Conditions for Exemption

The exemption is valid only if these criteria are met:

1. Age and Residency: The individual must be 75 years or older and live in India.
2. Income Source: Their sole income must be from a pension. They may also have interest income from the same bank where their pension is credited.
3. Bank Specification: The bank must be designated by the government.
4. Declaration: The individual must submit a financial declaration to the bank in a prescribed format.
5. Bank’s Role: The bank calculates and deducts TDS (Tax Deducted at Source). This includes considering applicable deductions and rebates.

After the bank deducts TDS, senior citizens under these conditions do not need to file tax returns.

Tax Rules for Senior Citizens

Senior citizens enjoy specific tax benefits:

• Senior Citizens (60–79 years): Basic exemption limit of ₹3 lakh.
• Super Senior Citizens (80+ years): Higher exemption limit of ₹5 lakh.
• Under the new tax regime (Section 115BAC), the exemption limit is ₹3 lakh for all.

Selecting the Correct ITR Form

Senior citizens must choose their Income Tax Return (ITR) form based on their income:

1. ITR-1 (Sahaj): For income up to ₹50 lakh, including salary, pension, rental income, and interest.
2. ITR-2: For income that includes capital gains along with salary or pension.
3. ITR-3: For income from businesses or professions.
4. ITR-4: For business or professional income under presumptive taxation (sections 44AD, 44ADA).

Not all senior citizens aged 75 and above are exempt from taxes. Only those meeting specific conditions qualify for this benefit. Claims about a blanket exemption are false. Always verify such messages with credible sources like PIB Fact Check to avoid misinformation.