NEW SIMPLIFIED TAX REGIME AND SENIOR CITIZENS

UNION BUDGET 2023-24 AND
​                      SENIOR CITIZENS 

PENSIONERS  HAVE TO SELECT  THE TAX REGIME : 

Dated 13.04.2023  : Income Tax Department has   directed the employers   to seek   options with regard to tax regime an employee  / pensioner wants to chose and pensioners have to inform  the same to his employer, regarding his intended tax regime   .  If choice  is not  intimated by the   pensioner , TDS will be calculated as per new tax regime . 

How  to select old /  new tax regimes ?  

Income tax department has developed a  calculator  to help the tax payers to chose the regime . To go the calculator , CLICK HERE  . 

You may fill the basic details  like  Residential status  , senior citizen status etc , your expected income for the year and  the total exemptions you are  eligible to get probable tax payable in both the regimes .    Based on the information provided by you  , tax will be calculated under both tax regimes  and you may chose the regime   .   

To read  the income tax department's circular ,   CLICK HERE ​

EFFECTS OF REVISION OF NEW SIMPLIFIED TAX REGIME FOR SENIOR CITIZENS

 02.02.2023 :  In the yesterday's budget speech  , Finance Minister Ms Nirmala Sitharaman    announced  revised   New and Simplified Personal Income Tax  regime for FY 2023-24   under which   Income tax slabs  are   revised and  additional  benefits are announced   for those   opting   for the new regime   . The new income tax will be   standard and old   tax regime will be  optional  . Either you can opt for it  or you may use  the last  year's IT slabs and rebates / deductions  whichever is convenient   . 

Under the new regime  ,  where tax  calculation is  simple . " Just tell me your income , I will tell your tax  "    as  it allows few exemptions  . It applies to  people of all ages  .  New rates  are lesser than the existing  rate structure  and are as follows  ( The rates under old regime is for the senior citizens  : 

​  . 

Income	IT RATES FOR  ​FY 2023-24  ​under old Regime	IT RATES UNDER NEW REGIME	DIFFERENCE
UP TO RS 2.5.LAKHS	0 %	0%	NIL
2.5 TO 3.00 LAKHS	0%	0%	0%
3.00 TO 5.00 LAKHS	5%	5%	NIL
5.00 TO 6.00  LAKHS	20%	5%	15%
6.00TO 9.00  LAKHS	20%	10%	10%
9.00 TO 10.00 LAKHS	20%	15%	5%
10.00 lakhs to 12 lakhs	30%	15 %	15 %
12 lakhs to 15 lakhs	30%	20 %	10%
Above 15 lakhs	30 %	30 %	nil

NOTE : Under section 87a  , Tax rebate can be availed  up to Rs 5.00 lakhs taxable  income in old regime and up to Rs 7.00 lakhs  in the new tax regime . 

 We can see from the above chart   that  there is  savings up to 10 %   in each of the  slabs , if we opt for new  regime   . New regime appears   simple  with lower taxes . But  the new regime comes with a clause  like " Terms & conditions  apply "   in commercial advertisement  . If you  opt for new regime ,  you have to forgo most of the rebates / deductions    you were claiming in the earlier years   .  

New  Updated Article 
            
 TAX PLANNING FOR FY 2022-23 ( AY 2023-24 ) 
Comprehensive   Article on Income tax changes in Rules, Rates , Slabs , Rebates  and Estimation 

CLICK HERE TO READ ​

WHAT SENIOR CITIZENS LOSE / GAIN IN THE NEW IT REGIME ? 

THE PRIVILEGES  SENIOR CITIZENS  GET  :  

Enhanced Rebate  under section 87a  up to the taxable income of Rs 7 .00 lakhs in the new regime  while limit of Rs 5 lakhs remains in the old tax regime 

THE PRIVILEGES  SENIOR CITIZENS TO LOSE :  
​

 1.   Deduction of  Rs 50,000 under section 80 TTB  on interest income from bank deposits    will  not   be available for senior citizens  .
​2. Health insurance premium paid up to Rs 50,000 available to senior citizens   under section 80 D will not be available  in the new scheme  . 
​3. Deductions / rebates under 80C will not be available  .

There are more than 70   rebates and deductions  which  senior citizens  may have to forgo along with other citizens  . But you may not be using all of them  now . 

THE PRIVILEGES  SENIOR CITIZENS   WILL RETAIN IN THE NEW REGIME  :  

 
 The  following  tax exemptions available on Retirement benefits will continue to be available  under the new tax regime also  . 

1.  Standard Deduction of Rs 50,000 on salaries / pensions
2. Tax free  gratuity up to Rs 20 lakhs 
3.  Leave encashment  on retirement 
a. Government employees - No limit 
b. Others - Rs 25.00 lakhs   
4. Benefits available on VRS  - Maximum of Rs 5 .00 lakhs 
​5. Deductions  available on Commuted Pension . 

 HOW MUCH A SENIOR CITIZEN CAN SAVE  IN THE NEW REGIME ? 

In order   to    find   how much  gain  a senior citizen  can have  or how much he / she loses   by opting for new  regime , we have taken    four examples  of senior citizens    who are eligible for  different levels of rebates and deductions   . We will work out  for each category for their different levels of income  . The four categories are . 

1. CATEGORY A : Businessmen and Professionals who are not enjoying any  rebate and deductions  like standard deduction , interest income  , etc  .  Their rebates are NIL  now . 

2. CATEGORY B :Retirees and pensioners  who are enjoying standard  deduction of Rs 50,000 ,  Deduction on bank deposit interest up to Rs 50,000  and    Rebate of Rs 50,000 under 80D  for health insurance premium .  Total Rebates  they are enjoying is Rs 1,50,000 . 

 3. CATEGORY C :Retirees and pensioners  who are enjoying standard  deduction of Rs 50,000 ,  Deduction on bank deposit interest up to Rs 50,000  and    Rebate of Rs 50,000 under 80D  for health insurance premium .   Further   they are  enjoying additional benefits of  Rs 1,50,000  under section 80C  by contributing to  LIC premium etc . Total Rebates  they are enjoying is Rs 3,00,000 . 


 4. CATEGORY D :Retirees and pensioners  who are enjoying standard  deduction of Rs 50,000 ,  Deduction on bank deposit interest up to Rs 50,000  and    Rebate of Rs 50,000 under 80D  for health insurance premium .   Further   they are  enjoying additional benefits of  Rs 1,50,000  under section 80C  by contributing to  LIC premium etc  and additional  deductions for  housing loan etc  up to another Rs 1,50,000 .   Total Rebates  they are enjoying is Rs 4,50,000 .   

Now  let us examine   the tax liability under    both old and new regimes  for each of the categories at different income levels 

  CATEGORY A   ( WITH NIL EXEMPTIONS AND REBATES ) : 

INCOME	TAX UNDER OLD SCHEME	TAX UNDER NEW REGIME	DIFFERENCE
5 LAKHS	NIL	NIL	NIL
6. LAKHS	30,000	NIL	30,000
7 LAKHS	50,000	NIL	50,000
8 LAKHS	70,000	40,000	30,000
9 LAKHS	90,000	45,000	45,000
10 LAKHS	1,10,000	60,000	50,000
11 LAKHS	1,40,000​	75,000	65,000
12 LAKHS	1,70,000	90,000	80,000
13 LAKHS	2,00,000	1,10,000	90,000
14 LAKHS	2,30,000	1,30,000	1,00,500
15 LAKHS	2,60,000	1,50,000	110,000

HEALTH INSURANCE PLANS FOR SENIOR CITIZENS
WITH OR WITHOUT ENTRY AGE RESTRICTION   
TO  READ THE ARTICLE
CLICK HERE 

 CATEGORY B  ( WITH  EXEMPTIONS AND REBATES OF TOTAL RS 1,50,000  INCLUDING SANDARD DEDUCTION OF RS 50,000  ) : 

INCOME	TAX UNDER  OLD SCHEME	TAX UNDER  ​NEW REGIME	DIFFERENCE
RS 5 LAKHS	NIL	NIL	NIL
6 LAKHS ​	NIL	NIL	NIL
7 LAKHS ​	​20,000	NIL	20,000
8 LAKHS ​	40000	30,000	10,000 ​
9 LAKHS ​	60000	40,000	20,000
10 LAKHS ​	80,000	52,500	27,500
11 LAKHS ​	1,00,000	67,500	32,500
12 LAKHS ​	1,25,000	82,500	42,500
13 LAKHS ​	1,55,000	1,00,000	55,000
14 LAKHS ​	1,85,000	1,20,000	65,000
15 LAKHS ​	2,15,000	1,40,000	75,000

CATEGORY C  ( WITH  EXEMPTIONS AND REBATES OF TOTAL RS 3,00,000 )

INCOME	TAX UNDER  ​OLD SCHEME	TAX UNDER ​NEW REGIME	DIFFERENCE
5 LAKHS	NIL	NIL	NIL
6 ​LAKHS	NIL	NIL	NIL
7 ​LAKHS	NIL	NIL	NIL
8 ​LAKHS	NIL	30,000	-30,000
​9 LAKHS	30,000	40,000	-10,000
10 ​LAKHS	50,000	52,500	-2,500
11 ​LAKHS	70,000	67,500	2,500
​12 LAKHS	90,000	82,500	7,500
​13 LAKHS	1,10,000	1,00,000	10,000
14 ​LAKHS	1,40,000	1,20,000	20,000
​15 LAKHS	​1,70,000	1,40,000	30,000

​INVESTMENT  OPTIONS  FOR SENIOR CITIZENS 
CLICK HERE TO READ

   CATEGORY D  ( WITH  EXEMPTIONS AND REBATES OF TOTAL RS 4,50,000 )

INCOME	TAX UNDER ​OLD SCHEME	TAX UNDER ​NEW REGIME	DIFFERENCE
5 LAKHS	NIL	NIL	NIL
6 LAKHS ​	NIL	NIL	NIL
7 LAKHS ​	NIL	NIL	NIL
8 LAKHS ​	NIL	30,000	-30,000
9 LAKHS ​	NIL	40,000	-40,000
10 LAKHS ​	20,000	52,500	-32,500
11 LAKHS ​	40,000	67,500	-27,500
12 LAKHS ​	60,000	82,500	-22,500
13 LAKHS ​	80,000	1,00,000	-20,000
14 LAKHS ​	1,00,000	1,20,000	-20,000
15 LAKHS ​	1,25,000	1,40,000	-15,000

   NOTES : 

1. With  revision   of tax slabs , inclusion of standard deduction  and  availability of sec 87a benefit up to Rs 7.00 lakhs  , new tax regime has become    more attractive   for the individual tax payers . 

2. Senior citizens with no exemptions at all  now   will  have  tax benefit  up to Rs 1,10,000   under the new regime compared to old one  .   Senior citizens  with even   higher  tax exemption up to  Rs 3.00 lakhs are   better off in many   tax   slabs . 
3. Pensioners / retirees who are having exemptions of Rs 4,50,000    will be better off with the old scheme 

 CONCLUSION :  The new regime is made simple by removing most of the privileges   senior citizens hitherto enjoying  .  Hence it was not attractive . But now  with revised  tax slabs  , the  new tax regime has become more attractive   and senior citizens   can utilize the   new regime if reduces the  tax liability 

Silver  lining  of the new simple regime is  it is optional .  You can chose either of the two   as per your convenience .