Travelling Abroad? Be Ready to Pay More From July 1, 2023

Sun, 25 Jun 2023 14:19:11 +0000

With a Raised 20% TCS Burden

The Buyt Desk

As per the new announcement in Budget 2023, the Tax Collected at Source (TCS) on foreign remittances, including bookings for tour packages, will rise 4 times from 5% to 20%. From July 1, 2023 you will have to keep additional money ready for the new “20% TCS” rule. An air ticket costing you Rs 50,000 will increase by additional Rs 10,000 with 20% TCS.

What is 20% TCS ?

TCS or Tax Collected at Source is basically a tax that sellers collect for their selected products and services from the customer. In terms of Foreign Remittance Transactions, it is the tax gathered from an individual making foreign transactions. Here, foreign transactions include sending money to a person, shopping and purchasing any asset, making an international trip, and more.

It is one of the new changes to the world of taxes for foreign transactions. The central government has notified changes of rules under the FEMA (Foreign Exchange Management Act), making 20% TCS a recent amendment. Indian citizens can transfer up to $250,000 in a financial year abroad, without the need for central bank approval.

Before the Union Budget 2023, the investment under the LRS beyond INR 7 lakh transaction value came under 5% TCS, applicable up to June 30, 2023. According to a recent amendment, all such foreingn currency transaction will come under 20% TCS from July 1, 2023. The Ministry of Finance clarified that foreign spending up to INR 7 lakh made through international credit or debit card will be exempted from TCS after June 30, 2023. But if the payment is done via online banking the entire payment with no minimum threshold will attract the increased TCS. The expenditure on education and medical treatment is exempted from higher TCS.

Can 20% TCS Be Claimed Back?

Yes individuals can file their income tax return and if TCS deduction is in excess of the tax liability then this amount will be refunded. But be prepared for a larger outgo when you spend in dollars, possibly blocking funds for many months until they get their return or claim the refund, and the gathered tax is adjusted. Taxpayers must track the TCS entries in Form 26AS.

Why is government levying this tax?

TCS is an advance collection of tax on expenses incurred by an individual. The rationale behind this move is to track whether the person making high value foreign remittance reflected proportionatelyin their income tax return or not.

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How Married Couples Should Buy a Health Insurance?

Tue, 20 Jun 2023 16:11:14 +0000

The Buy Desk

If you are getting married soon or have married just recently, you must consider investing in a health insurance policy that provides maternity benefits. Although you are not legally bound to port your health insurance post-marriage, it will assist you in getting coverage for your and your growing family’s future requirements.

Why Married Couples Should Have Health Insurance?

No one knows when they have to deal with unexpected medical emergencies. To successfully meet those emergencies without breaking the bank, health insurance comes to the rescue. The main reason couples need to have a health insurance plan after marriage is to effortlessly cover the cost of medical expenses. It will help you prevent catastrophic financial costs.

Which Health Insurance Policy Should Married Couple Buy?

Nowadays, multiple health insurance plans are available in the market with excellent maternity coverage. If you are already covered under any corporate health insurance policy, you can consider buying a personal health insurance cover of at least 10 lakh sum insured. Let’s discuss some of the best ways to buy a health insurance plan after marriage–

Family floater scheme

You may go for a family floater plan that consists of a simple documentation process. Buy a family floater plan or include your wife if you have already purchased it. As per this scheme, your wife will be included under the coverage of your family-floater insurance plan. The inclusion can be done immediately after marriage or upon your policy renewal.

Based on your health insurance providing company, this may overrule the previous coverage under pre-determined T&Cs (terms and conditions). If you have an individual plan and your wife financially relies on you then you must include her in your plan. You will get tax deductions on your paid premiums.

Continue or port the plan

If your wife is financially independent and has her own health insurance policy, she can either port the plan to another individual policy with her new married name or continue with the existing plan by changing the maiden name via endorsement.

Options for wives for their husbands

If you have been covered under a health insurance policy before marriage, change that plan to a family floater plan with your spouse included in the policy coverage. However, if your partner already has a separate individual plan, continue with your existing plan with a changed name.

If you have purchased a family floater plan for your parents before marriage, add your husband in the plan after marriage excluding your parents. Another option is to purchase another family floater plan with you and your husband in the coverage while continuing the existing one. Just be sure that you inform both insurance providers so that a proportionate claim would be paid by both providers during a claim.

Options for a married couple

If any of the partners was not covered under any insurance cover, buy a new individual health insurance cover irrespective of if there is an already family-floater scheme post marriage. You may get two separate individual insurance plans for both of you.

If the wife is financially dependent on her husband, the husband can be the proposer in both individual plans, and vice-versa. Other than this, the wife can be a proposer in her policy and the husband in his policy in case they both are financially reliant. Note that this may increase the payable premium and the amount to be invested in the plan. Alongside two separate individual plans, married couples can consider buying a family floater plan with coverage of both of them in a single plan. The husband or a wife could be the proposer given that the proposer is financially independent.

Whether or not you and your partner need health insurance is completely your personal decision. Make this decision based on your financial condition and other essential parameters. However, it is recommended to compare multiple policies before buying a specific one. Go through the inclusions and exclusions and associated terms and conditions before purchasing a policy.

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What is a Restoration Benefit in Health Insurance?

Mon, 19 Jun 2023 16:24:04 +0000

The Buyt Desk

After the COVID-19 pandemic, almost every person has understood the significance of buying a health insurance policy. Having adequate health coverage is equally important. Given the increasing medical inflation, an insufficient sum insured could land you in a financial mess. To stay safe from this situation, restoration benefit assists a lot. It provides additional protection against unforeseen medical crises.

What is Restoration Benefit in Health Insurance?

Generally known as the refill benefit, the restoration benefit refers to the benefit wherein the insurance company restores the sum insured by a policyholder up to the maximum limit after it gets completely exhausted after a claim for any treatment.

This benefit is provided for individuals and their families under health insurance plans. You can use this benefit as your backup plan or an add-on cover to your current insurance plan. You’ll have to pay a higher premium for restoration benefits with your health insurance.

For example, an individual has purchased a health insurance plan of INR 5 lakhs with restoration benefits. The whole sum insured gets exhausted from his heart surgery. Now, after some months, he had to undergo cancer surgery costing about INR 4 lakhs. He doesn’t need to arrange funds from other sources as the entire expenses get covered in his health policy by restoring the original sum insured of INR 5 lakhs.

Types of Restoration Benefit

There are two major types of restoration benefits based on the level of exhaustion of the sum insured –

Partial exhaustion

This restoration benefit comes into force when the partial sum insured is exhausted. Go with this benefit only when it is proven highly beneficial.

Complete exhaustion

This restoration benefit comes into play when the whole sum insured is exhausted. This benefit comes with most health insurance policies.

Benefits of Restoration Benefits in Health Insurance

Purchasing a health insurance plan with a restoration benefit provides numerous advantages –

Get the complete amount of your sum insured reinstated as soon as the original sum insured expires.
It provides more financial efficiency than purchasing a health plan with twice the sum insured.
This benefit will cover you against several medical costs for different illnesses within the same year.
You would not need to worry about future medical expenses even when your original sum insured has already been exhausted. The required amount can be restored for any unexpected medical emergencies or needs in the future.

Who can Buy Health Insurance Policy with Restoration Benefits?

Older individuals who have more possibility to develop health conditions should opt for restoration benefits. People who are susceptible to some illnesses should also consider this benefit to get the treatment done without worrying about medical cover getting exhausted. Alongside them, people living in metropolitan cities or high-cost-of-living regions should opt for health insurance plans with restoration benefits.

Things to Consider When Buying a Health Insurance Plan with Restoration Benefit

You can buy the health insurance with restoration benefit as an add-on to your policy or health insurance premium while buying a new policy or renewing the pre-existing one. It will be available as a valuable add-on for individual and family floater plans. It means when any family member exhausts the base cover, other members can also take advantage of the cover.

Before opting for restoration benefits, consider the following points –

If you don’t use the restored sum insured in the year it was restored, it can’t be carried forward.
This benefit will be activated for unrelated medical issues.
You can opt for restoration benefits while purchasing an insurance policy with a nominal additional cost.
This benefit will not be applicable in your first insurance claim in a policy year. It will be available once the partial or complete sum insured is exhausted.
This benefit is meant just for future claims.
Only one family member can get the restoration benefit at a time.
Some policies might include the same health condition during a policy year while other policies allow the use of a restored sum insured by other family members for the same illness.

To enjoy all the advantages, thoroughly read the fine print of your policy with restoration benefits.

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How ELSS Helps You in Cutting Tax Liability?

Mon, 12 Jun 2023 18:04:26 +0000

The Buyt Desk

If you to invest money in a manner that will help you save tax then equity linked saving scheme could be a smart choice. Under section 80C of the Income Tax Act, 1961 a maximum investment of 1.5lakh can be claimed as a tax deduction. Equity Linked Saving Scheme (ELSS) investment can give you the benefit of a Section 80C deduction. It comes with multiple benefits apart from providing you with a safe option for wealth accumulation and tax deduction.

What is Equity Linked Saving Scheme?

It is the only mutual fund eligible for tax deduction under section 80C provision of the Income Tax Act 1961. In this mutual fund, 65% allocation goes into equity and equity-linked securities like listed shares. It may have some exposure to fixed-income securities as well. The best part of this fund is that it comes with the shortest lock-in period of 3 years as compared to the other investment avenues in section 80C. It allows you to invest as much as you wish, but the tax benefit will be on 1.5 lakh. The scheme has been broadly classified into two types.

Growth Funds – This is a long-term wealth creation platform, and the investor receives the full value at the time of redemption.

Dividend Funds – This has been again divided into Dividend Payout and Dividend Reinvestment. In the first option, Dividend Payout, you get a tax-free dividend. On the other hand, in Dividend Reinvestment, the dividend received is reinvested as a fresh investment.

What are the Upsides of Investing in ELSS Over Other Options in 80C?

The fund offers tax deductions of up to Rs. 1,50,000 a year under the section 80C provision.
It has the shortest lock-in period. The lock-in period of all options in 80C is as follows

Investment	Lock-in Period
Equity Linked Saving Scheme (ELSS)	3 years
National Savings Certificate	5 years
Public Provident Fund	15 years
Employee PF and VPF	More Than 15 years

The return that you earn in ELSS is better than the other investment options

Investment	Estimated Return
Equity Linked Saving Scheme (ELSS)	15-18%
National Savings Certificate	7-8%
New Pension Scheme	8-10%
Public Provident Fund	7-8%
5 Year Bank Fixed Deposit	6-8%

There is no upper capping in ELSS investment. On the other hand, minimum capping depends on the mutual fund house.
It is the only tax-saving investment that offers inflation-beating interest. Also, it is the highest among all other options in section 80C.
It gives twin benefits. You can create wealth while saving tax.

How to Start Investing in ELSS?

Investing in ELSS is easy. You can do it online too. To start, you need to open an account with the fund house of your choice and complete the KYC process there. After the verification, you can invest the following way.

Choose the platform through which you will invest.
In the category, select the option “Tax Saving”.
Select the fund you want to invest in.
Tap on “Invest Now”. Follow the remaining process to start.

The features mentioned make ELSS a better option to save tax and accumulate capital. However, keeping all precautions while selecting the fund house will protect you from risks. A direction from an expert is good if you are doing it for the first time.

Also, ELSS redemption is not tax-free. The long-term capital gain of Rs 1,00,000/year is tax-free. Gain above the limit, attract tax of 10% in addition to applicable surcharge and cess.

The dividend you receive from your investment is added to the overall income and taxed according to the tax slab you fall. Despite all the conditions, it is the best tax-saving option under section 80C of the income tax act.

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How to Plan an Inflation-Resistant Retirement Corpus?

Wed, 31 May 2023 17:31:59 +0000

The Buyt Desk

As you closely observe the retirees in your surroundings, you will notice two distinct groups. One group retired from a government job enjoying a comfortable retirement supported by a decent pension. Another group of retirees struggle to make ends meet and find it difficult to cope with the rising cost of living. They are private job retirees having no pension or second income source.

But, shortly, the disparity between these two groups will no longer exist as the government has ended the pension scheme in most jobs. As a result, those who are proactive and plan retirement corpus smartly will likely to have a more comfortable and fulfilling post-retirement life.

Thus, one must plan for retirement at an early age. And while planning the retirement corpus, keep the inflation in the centre. It is because inflation will increase the price of everything around. Today, things that cost Rs 100 would cost Rs 200 or even more after ten or twenty years.

If you don’t believe this, remember that cup of tea you would enjoy with your friends in the canteen during college. At that time, the cost of that cup was Rs 2, and now, the same cup might cost you Rs 10 or even more. The price rise is the result of inflation.

After ten more years, the price of the same cup of tea will be even higher because of inflation.

So, you must understand that inflation has a compounding effect on prices. It means the prices of things will continue to rise year after year, and if you plan your retirement corpus according to the current inflation rate, you may fall short of the funds required to sustain you during the post-retirement period.

E.g., Suppose today you need Rs 1 cr for retirement. After 20 years, with 6 % inflation, your requirements will be Rs 3.20 cr to meet the same requisites.

What is the Best Method to Grow Your Retirement Corpus in Pace with Inflation?

Building a corpus for retirement in pace with inflation doesn’t mean you should work harder and save more. Instead, let your investment do this job for you. It is the easiest and smartest way.

To ensure your investment grows in pace with inflation, it must earn at least 1% or 2% interest above the projected inflation.

The average inflation in India is 6%. Hence, your target should be to earn a minimum of 7% to 8% return on investment post-tax deduction.

You can target 1-2 % above the inflation, but try to attain a 7-8 % average. If you fail to do so, inflation will harm your retirement corpus.

Which Investment Products Give Higher Returns?

Traditional investment products such as FD, PPF, and NPS generally yield a return that ranges between 5-6 per cent. On the other hand, investment products like mutual funds, equity, and real estate deliver more return, up to 11-12% in the long run.

Although, the investment is subject to individual risk-taking ability. The investment that gives higher returns comes with high risk too.

Conclusion: Planning for retirement corpus is the need of time today. To ensure your retirement corpus outpaces inflation, include traditional and non-traditional both investment products in your portfolio. Traditional Investment products like FD, Bonds, and PPF offer relatively stable returns but may not keep up with inflation. On the other hand, non-traditional investment products such as the stock market and mutual funds have given higher returns and outpaced inflation.

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Why Should You Know The Lock-in Period of Your Investments?

Sun, 28 May 2023 05:36:50 +0000

The Buyt Desk

Before you start an investment you must know the lock-in period of that investment tool. But why is it so important to check the lock-in period of the investment product? Let us understand.

What is the Lock-in Period?

The lock-in period is a length of time for which investors lock the investment fund for investees. Any withdrawal from the account during this period remains restricted. E.g., if any investment product has a lock-in period of three years, the investor cannot withdraw the fund before it completes 3 years. After that, he can choose to continue or surrender the investment. If an investor chooses to discontinue his investment before the lock-in period and stops paying the due, he may not receive the full refund and in many cases end up paying a penalty too.

Every investment comes with a lock-in period with diverse tenures. E.g., the lock-in period of PPF is different from FD or ELSS. Therefore, when you invest it is important that you check its lock-in period in advance. If you don’t want to block your money for a long time, invest in financial products with a short lock-in period.

Lock-in Period of Different Investment Policies

Public Provident Fund – PPF is a favourite investment product for no-risk taker investors. It is a risk-free investment that also provides tax benefits. However, it comes with a set of rules for the fund withdrawal.

The lock-in duration of PPF is 15 years.
Partial withdrawal of up to 50% is allowed in PPF after seven years of account opening.
One partial withdrawal is allowed in a year.
Early closure of a PPF account is possible in certain exceptional conditions and comes with a penalty.

National Pension System – The National Pension System (NPS) matures only when the subscriber retires i.e after the age of 60 years.But there is a provision for part withdrawal after a minimum lock-in period of three years.It can be availed only for special circumstances.

The account holder can withdraw up to 25% of his contribution from the NPS account for reasons like illness, disability, to purchase property, child education or marriage and to start a new venture.
Partial withdrawal is allowed for a maximum of 3 times in the entire tenure of NPS.
After five years, a subscriber can withdraw a maximum of 20% of accumulated corpus as lump sum and 80% of the fund he should use to purchase an annuity plan to receive the pension.
Normal withdrawal is allowed at the age of 60 years, the account holder can withdraw a maximum of 60 % from the accumulated fund and 40% of the fund he should use to purchase an annuity plan to receive the pension.

Tax Saving FD – The lock-in period for tax saving FD is five years. It does not let the account holder do any transaction on the amount before the lock-in period.

ELSS Fund – This fund has a lock-in period of three years. After the end of a three-year period for a specific investment, ELSS becomes an open-ended equity-oriented investment scheme.

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5 Reasons That Can Lead to Term Insurance Claim Rejection

Fri, 26 May 2023 17:17:53 +0000

The Buyt Desk

How to ensure that the life insurance which you are buying for your family does not get rejected. It is disheartening to see families struggling after losing the breadwinner of the family. The term insurance that they had been counting on for years to address emergencies gets turned down by the company in the eleventh hour. The insurer rejected the claim, giving reasons hard to swallow.When this happens, we start blaming the insurance company and the entire service, but is the insurer always at fault, or are you accountable for it?

Many times insurance claim rejection happens because of the policyholder.People make mistakes while buying term insurance that lands them in such a situation. The 5 mistakes that can lead to claim rejection are as follows-

Concealment of Information – The most common mistake people make while buying a policy is that they get casual in providing relevant information to the insurer. Never do this!

Always be proactive in asking questions and providing information about your lifestyle, habits, health, etc. If you provide wrong information or if the provided information happens to be false, the insurance company has the right to reject your claim.

Non-payment of Premium – Paying the premium on time should always be on your priority list. Never postpone premium payment to the next date or month; otherwise, your policy will lapse, and a lapsed policy is unclaimable.

Insurance companies give some grace period to pay the premium, which varies from insurer to insurer, but on average, it remains between ten to fifteen days. Do not cross your premium due date.

Death Due to Excluded Clause – Excluded clauses are conditions which insurers do not entertain. If the policyholder happens to die because of any excluded clause, the insurer will not accept the claim. The best thing to do in this case is to carefully read the terms and conditions of insurance before taking it.

Non-Disclosure of Hazardous Activities – If you enjoy adventure and engage in hazardous activities, you should pick the insurance policy accordingly. However, if you have chosen the wrong insurance and happen to meet with an accident, the insurer might reject your claim.

Providing Wrong Information – If you provide false or misleading information about your health while applying for a policy, your claim might get rejected. For instance, if you have mentioned in detail that you don’t smoke, but later on, if the insurance company finds out you are a smoker, they may reject your claim.

Conclusion: Term insurance protects families in times of emergency.It is bought with the purpose to help the family as a means of income replacement. However, to avail of all its benefits, one must comply with the policy terms and conditions and provide accurate and relevant information while buying the policy.

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Is Mutual Fund a New Investment Destination for Indian Women?

Thu, 25 May 2023 17:33:57 +0000

The Buyt Desk

Things are changing for women in India in every sector. They are doing all types of jobs, even the traditional male-dominant bastions. So, when it comes to finance management, they are not behind. Women are doing excellent work in personal finance management.

The latest study by the Association of Mutual Funds in India (AMFI) states that women’s participation in the Mutual Fund industry has witnessed a significant increase in the last few years. It has risen to 14% year-on-year. The number of women investing in mutual funds has increased to 74.5 lakhs in December 2022 compared to 63.8 lakhs in the same month last year. The more interesting fact is that the increased number of women investors in mutual funds is not limited to big cities. Instead, there is participation across the country.

The number of unique investors has tripled from 2017 to 2023. In 2017, the number of women investors in the mutual fund was 1.20 Crore, which has risen to 3.77 Crores in 2023. The leap has come after the Covid-19 breakout.

According to the AMFI, women investors in the 25-35 age group have shown higher participation. It means young professional women have become cautious about their finances and doing financial planning proactively.

In terms of Age

If we break the data age-wise, 35 percent of investors are in the age bracket of 45 years and above. The major contributors are women between the 18 to 24 year age category. Their percentage share has increased in the last ten years.

In terms of Asset

In terms of asset break-up, women investors have invested approximately Rs. 6.13 trillion in regular Mutual Funds and about Rs 1.42 trillion in direct plans.

Women have come a long way in the last few decades and have changed their stereotypical image. It is visible in the field of financial planning as well. They know how to handle their finances to secure their future. The rise in women investors in the Mutual Funds market reflects the same.

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5 Investments That Will Support Your Child’s Education

Wed, 24 May 2023 18:17:03 +0000

The Buyt Desk

As your child starts schooling you start planning for her/his higher education too. You realize how the cost of education has increased over the years and you don’t want to leave any stone unturned when it comes to her/his higher education. So, what is the foolproof plan to ensure you and your child get what you both aspired for when she/he is ready?

The cost of higher education has increased tremendously in the last few decades. It has risen more than food, fuel and medicine. Its average inflation rate is 10%-12% per year. Therefore, it becomes prudent for you to get worried about your child’s higher education before it’s too late. If you start investing at the right time, in the right plan with the appropriate amount, you can secure your child’s higher education fund before they are ready to fly.

Best Investment Avenues to Support the Education of a Child

Children-Focused Insurance Policy – Children-focused insurance policies are one of the preferred ways to secure funds for higher education as well as protect the child incase of any eventuality. If the parent meets with an untimely demise this plan can help in covering the expense of the education. They give bonuses and sometimes even a return on the investments too.

Additionally, unlike the usual investment plan, the children-focused policy becomes a hedge for children in difficulty. Waiving off premium if something happens to the premium depositor and paying the sum accumulated are a few of them.

Equity Mutual Fund – If you have an appetite to take risks, an equity mutual fund could be an option you can rely on. It gives a better return than children-focused policies and thus has the potential to beat inflation in the education sector. The average annual return mutual fund has offered till 2022 in several broad categories is 11.54%. However, before investing in a mutual fund, do check its nitty-gritty. It is crucial.

Public Provident Fund – PPF is a traditional but the most effective way to accumulate funds to support child education. It is one of the most favoured options among investors.It has government backing, offers steady, decent returns and is tax efficient. PPF accounts are easy to open at the post office and banks. But do remember that it has a long lock-in period of 15 years.

Invest in Sovereign Gold Bond (SGB) – Gold has been a consistent performer in offering returns. Because buying and keeping solid gold is risky these days, SGB is a safer way to invest in gold. It offers an interest of 2.5% pa on face value with capital appreciation. With SGB you lock your money for a long term i.e. 7 years though you could sell it in the secondary market after the fifth year. SGBs come with the benefit of capital gains exemption if held till maturity.

Recurring Deposit – If you do not have a lump sum amount, you cannot invest in a policy or FD. In this situation, RD is a solution. A regular deposit of a small amount will help you build a corpus. It is also a way to get a contingency fund. An RD of Rs 2,000/month for five years at an average interest rate of 6% can help you accumulate Rs. 1,40,128. Or you can open a recurring deposit for one year to build a corpus for FD or another investment that offers a higher return.

Things to Remember

Be critical while selecting an option to build a corpus for your child’s higher education. Invest in plans that can beat inflation in the sector yet offer security. For that, it is better not to rely on one investment avenue. You can choose two or more plans to get a better return and avoid financial stress.

Make small goals and try to achieve them step by step. Most importantly, start as early as possible. If you start early, you will get better results.

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Income Tax Rules for Senior and Super Senior Citizen

Mon, 22 May 2023 16:24:38 +0000

The Buyt Desk

The income tax framework in India relies on the progressive taxation system. According to this system, people with higher income levels pay a significant percentage of their income in the form of taxes. Several provisions have been made for specific exemptions to senior and super senior citizens retired from their active professional lives.

A senior citizen is an Indian resident whose age is above 60 years and below 80 years. For people who are above 80 years or more they are considered as super senior citizens. Senior citizens get a special tax slab and enjoy more tax deductions for interest gained from bank and post office, deductions under medical insurance premiums, and more.

Basic exemption limit

The income tax benefits are quite akin for senior citizens and super senior citizens for the financial year 2023-2024, however, there are some differences in the higher basic exemption limit. The exemption limit is Rs. 3 lakh for senior citizens. So, they’ll not have to pay any tax if their income is Rs. 3 lakh or less.

The basic exemption limit is Rs. 5 lakh for super senior citizens, which is higher than that provided to senior citizens. This higher exemption limit is to ensure that super senior citizens have a higher disposable earning for their medical and other needs. The exemption limit is Rs. 3 lakh for senior citizens and super senior citizen taxpayers under the New Tax Regime.

Income Tax Slab for Super Senior Citizens Under Old Tax Regime

Super senior citizens can enjoy the benefit of old as well as new tax regimes because they have the right to choose between the two. According to the old tax regime, the tax slab rates for super senior citizens include –

Income up to Rs. 5,00,000 no income tax
Income Between Rs. 5,00,001 to 10,00,000 20% income tax
Income More than Rs. 10,00,000 30% above Rs. 10 lakhs.

Income Tax Slab for Senior Citizens Under Old Tax Regime

Senior citizens have the option to pay the tax according to the old or new tax regime. Non-resident senior citizens are not eligible for the tax slabs highlighted below. The reason is that the normal provisions of income tax apply to them.

The income tax slab for senior citizens is highlighted below –

Up to Rs. 3,00,000 slab without any tax.
Rs. 3,00,001 to Rs. 5,00,000 with a 5% tax rate.
Rs. 5,00,001 to Rs. 10,00,000 income slab; Rs. 10,000 and 20% of income more than Rs. 5,00,000.
More than Rs. 10,00,000 income slab; Rs. 1,10,000 and 30% of income more than Rs. 10,00,000.

The above-mentioned tax for senior citizens and super senior citizens can be increased by Health and Education Cess at the 4% rate of the income tax. Moreover, the surcharge is applied based on the total earning as given below –

10% surcharge rate for total income greater than Rs. 50 lakhs.
15% surcharge rate for total income greater than Rs. 1 crore.
25% surcharge rate for total income greater than Rs. 2 crores.
37% surcharge rate for total income greater than Rs. 5 crores.

Under the new tax regime, the surcharge rates have been decreased to 25 percent for taxpayers having more than Rs. 5 crore income.

Income Tax Slab Rate Under New Tax Regime

Finance Act, 2020 announced a new tax regime for senior and super senior citizens. According to this new regime, they need to pay a concessional tax. They have to let go of many available deductions and exemptions.

According to the new tax regime, the income tax slab rates are –

Up to Rs. 2,50,000; no income tax rate.
Rs. 2,50,001 to 5,00,000; 5% income tax rate.
Rs. 5,00,001 to 7,50,000; 10% income tax rate.
Rs. 7,50,001 to 10,00,000; 15% income tax rate.
Rs. 10,00,001 to 12,50,000; 20% income tax rate.
Rs. 12,50,001 to 15,00,000; 25% income tax rate.
More than Rs. 15,00,000; 30% income tax rate.

Senior citizens and super senior citizens are eligible for a tax rebate of Rs. 12,500 if their earning is less than Rs 5 Lakhs. It is applicable for both the tax regime.

Tax Rebate and Deductions for Senior Citizens Will let go if they pick the new tax regime are as follows-

In the old tax regime, under the section 80TTB of Income Tax Act, senior and super senior citizens are eligible for a deduction of Rs. 50,000 on income earned from interest of savings banks as well as on their fixed deposits.

Under Section 80D, health insurance premiums of Rs 50,000 can be claimed as deduction by senior and super senior citizens.

Senior and super senior citizens can claim a deduction of Rs 1 Lakh in respect of medical expenses incurred for specified diseases of self or dependent senior citizens as per the Section 80DDB of Income Tax Act.

They can claim a flat deduction of Rs. 1,00,000 in respect of medical expenses incurred for specified diseases of self or dependent senior citizen relatives as specified in the Act under Section 80DDB.

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