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What are the taxability requirements of Retirement Benefits?

 

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What is the Income Tax?

A tax is an obligatory expense of an individual who falls under the category of a particular income tax slab. The governmental organization makes the slabs in order to fund various public expenses.

A taxpayer is simply an individual who has to pay a specific tax amount.

If the taxpayer does not pay the tax amount on time, he has to face certain penalties and bear other consequences

Income Tax Return Filing (ITR) Filing

Income Tax Return(ITR) is a report of income earned to calculate tax liability and payment or refund of taxes.

The Income Tax Return Filing is filed for the purpose to report income and taxes that are paid to the Government. Income tax return contains details of annual income and the amount of tax paid.

Citizens of India whose income fall under one of the income tax slabs have to file Income Tax Return filing (ITR) every year.

ITR Filing is essential for individuals whose income exceeds the prescribed income limit. This process is regulated under the Income Tax Act 1961(ITA). The declaration contains details about the income earned during the period of 1st April to 31st March.

Pension is normally taxed on an individual’s income earned through salary under the head of the salary. It is either paid on a monthly basis or in a bulk amount which is called a commuted pension, whereas, pensions paid on a periodical basis which is called uncommuted pension and are liable to pay tax.

Retirements Benefits

Retirement comes with various benefits with regard to paying income tax. The income tax slabs are different and are specifically made for individuals who have reached the retirement age.

Senior citizens are all those individuals that fall under the age bracket of 80 years old and above 60 years of age.

Income Tax Slabs

The minimum exemption for individuals from paying income tax is Rs 3 Lakh. It is for those that fall under the category of senior citizens, which means if the income of the individual is under Rs 5 Lakh, he is not liable or pays any tax.

Pension income taxable as 'Salary' has to be reported by mentioning the name, address, tax collection account number (TAN) of the employer and the amount of tax deducted (TDS).

The certain limit on the pension amount exempted from income tax must be reported as 'Commuted Pension’.

The Senior Citizens are supposed to file their income tax return in order to claim their tax refund. The first step in the filing is filling up the Income Tax Return (ITR) forms which are ITR 1 and ITR 2.

Income Tax Filing for Senior Citizens

ITR I – Individuals whose total Income Includes:

  • Salary or pension
  • Income from house or property (excluding the property that has incurred a loss of any kind)
  • Income from other sources

ITR 2 - Individual whose total Income Includes:

  • Salary or pension
  • Income from house or property
  • Capital gains
  • Income from other sources
  • Incidents where the income of an individual has to be combined with the income of another individual

Income Tax Benefits for Senior Citizens

  •  Benefits under Medical Insurance
  •  General Exemption Benefit
  •  Privilege on Interest Income
  •   No Advance Tax
  •    Allowance on the treatment of specified diseases
  •      Income Tax Return benefits
  •      No tax under the Reverse Mortgage Scheme
  •      No tax under the Reverse Mortgage Scheme
  •      Standard Deductions from Pension Income

Benefits under Medical Insurance

According to provisions mentioned in Section 80 D, the senior citizens can avail benefits at the time of payment for health insurance premiums. The amount could be up to Rs 50,000. Prior to this, the limit of deduction for health premium payment was Rs 30,000 for senior citizens.

General Exemption Benefit

The benefits of the income tax set by the Government are up to Rs 3 Lakh. It means the senior citizens do not have to pay any tax if their income amount is less than the amount prescribed in the slab.

Income tax slabs for Senior Citizens for the financial Year -2020

  •  Income up to Rs 3 Lakhs Tax rate – No tax
  • Income between Rs 3 Lakh and Rs 5 Lakhs Tax rate – 5% on the Income
  • Income between Rs 5 Lakhs and Rs.10 Lakhs Tax rate – 20% on the Income
  • Income exceeding Rs 10 Lakhs Tax rate- 30% on the Income

Income tax slabs for Super Senior Citizens for the financial Year -2020

  •  Income up to Rs 5 Lakh Tax rate – No tax
  • Income between Rs 5 Lakhs and Rs.10 Lakhs Tax rate – 20% on the Income
  • Income exceeding Rs 10 Lakhs Tax rate- 30% on the Income