Relying only on corporate health plan can impact your finances

Supplement it with a retail plan which has adequate sum insured and no room rent or diseases-wise capping

A recent study of over 2,000 corporate health insurance policies by Policy Bazaar found that they come with a number of limitations. While an employer-provided cover can serve as a valuable first line of defence, employees should not rely on it alone.

Key deficiencies Room rent capping: The Policy Bazaar study found that 12 percent policies impose a room rent cap equivalent to 1 percent of sum insured, while another 48 percent limit the room rent at Rs 5,000/- per night.

If a corporate policy offers a sum insured of Rs 3 lakh and imposes a room rent cap of 1 percent, the maximum room rent allowed would be only Rs 3,000/-per night, insufficient for securing a single, air-conditioned room in a top-tier hospital in a metro. Imagine that a person’s corporate cover allows him maximum room rent of Rs 5,000/-per night, but she opts for a room that costs Rs 10,000/- “The room rent cap is 50 percent of the actual rent in this case. The fallacy most people commit is to think they will only have to pay the balance Rs 5,000/- out of their own pocket. In reality, the insurer will apply proportionate deduction and pay only 50 percent of the overall bill.”

Limited sum insured: The study found that 26 percent of policies offer a sum insured of only Rs 1-2 lakh, while another 48 percent provide coverage worth Rs 3-4 lakh. Corporate do so to curtail their premium cost. However, a sum insured of up to Rs 4lakh can prove inadequate in case of a serious ailments.

Co-payment: Many policies come with a 10-20 percent co-payment requirement. This means the customer has to pay 10 (or 20, as the case may be) percent of the bill out of his pocket, with the insurers paying the balance 90 percent.

Sub-limit for cataract: 72 Percent of corporate covers come with a sub-limit of Rs 25,000/-for cataract while another 22 percent cover it up to Rs 15,000. With the rise of less-invasive procedures, however, treatment costs can go up to Rs 1.5-2 lakh.

Robotic surgery: It ensures greater precision in surgical procedures, but 67 percent of corporate plans cover them up to 50 percent of sum insured.

Reduced members covered: Corporate policies are reducing the breadth of coverage.”Most only cover the employee and his immediate dependants, like spouse and children. Older dependants like parents and in laws-are not covered as doing so drives up the premium.

Transient cover: Corporate health insurance is contingent on one’s employment with a company. Job changes (to a company that doesn’t offer this cover), layoffs, or starting one’s own venture can result in loss of coverage.

Benefits of PED coverage

Corporate plans do have their merits. The employee doesn’t bear the premium cost. “Corporate plans cover pre-existing diseases (PEDs) from day one, without a waiting period.”

Notwithstanding the limited sum insured, these policies can take care of shorter-duration hospitalisation for non-serious ailments.

Don’t delay purchase of retail policy

Postponing the purchase of a retail policy until retirement, as many do, can prove risky.“At 58-60, you may have a few chronic ailments due to which insurers may not offer you a policy.”  Even if they do, the policy may have a limited sum insured, or come with a waiting period for PEDs.

The retail policy must have adequate sum insured so that it is able to cope with India’s 12-15 percent healthcare inflation. “Buy as much sum insured as your pocket allows. Health insurance premium don’t increase proportionately with the sum insured,” Kasliwal suggests purchasing a minimum base cover of Rs 10 lakh and supplementing it with a super top-up.

Retail plan: Must have features

Avoid policies with room rent capping or disease-wise sub limits. “Families with young children should have a policy with an OPD cover. HNIs, who may want to go abroad to get a serious ailments treated, may opt for a policy that offers global coverage,” Kasliwal suggests choosing a policy whose cashless network includes hospitals in your vicinity.

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 Nil ITR: A must for those with no taxable income

When it comes to filling a tax return, experts reiterate one mantra irrespective of the taxpayer’s income level: File your return even though your taxable income is below the threshold for filling Income-Tax Return (ITR).

An ITR filed when an individuals or any entity’s income falls below the taxable limit is referred to as a nil ITR. “By submitting this return, taxpayers demonstrate that they did not earn enough income during the financial year to be liable to pay income tax.”

Multiple benefits 

While the Income-Tax (I-T) Act of 1961 does not make it mandatory for one to file a nil ITR, doing so has myriad benefits. “A nil return is accepted as a valid proof of address when applying for a passport or a visa.” This is particularly beneficial for young people choosing to emigrate, who may not have a taxable income.

“It helps to sidestep any potential penalties or legal hassles. It ensures a clean record with the tax department, while also serving as a legal proof of income.”Despite an individuals’ income being below the taxable limit, banks at times deduct Tax Deducted at Source (TDS) interest from fixed deposits (when the interest income crosses the limit for TDS deduction). “A nil ITR must be filed to claim refund of TDS or any excess tax paid.”Those encased in business activities, or having substantial investments, must suffer losses, an ITR filing is mandatory to carry forward those losses.

Banks, too, ask for your ITR when you apply for a loan. “ITR is useful when applying for loans, or when securing compensation for accidental death or disability. It is also instrumental in establishing trust with potential business associates. Even applications for government tenders might require tax return receipts of the preceding five years.”

In shorts, consistent filing of ITR, including nil returns, bolsters an individual’s financial credibility. The I-T Act also makes the filing of nil return necessary for specific categories of taxpayer.”For designated types of business entities, submitting a nil return is obligatory under the I-T Act, even if there is no activity within a firm or its operations have not commenced.

You can’t do without it

There is a widespread misconception that filing a nil return is not necessary if no tax is due. 

“If you meet the criteria for ITR filing, you must submit a return, even if it’s nil. Non-filing can result in penalties, scrutiny, and legal issues.”

How to proceed?

The procedure for filing a nil return is similar to filing a regular ITR. “A resident person without foreign assets can file in ITR-1. A non-resident or a resident with foreign assets can file in ITr-2.”

Additional conditionalities

Be aware of whether your financial situation requires you to file a nil return. “Such a situation could arise when despite your income being below the basic exemption limit, you may be required to file a return because you meet certain conditions, such as foreign travel expenditure or electricity bill exceeding the defined threshold limit.”

Even when filing a nil return, double-check all information to prevent inaccuracies or inconsistencies that could result in penalties or processing delays. “Report all income sources, even if they amount to zero. This practice can be advantageous for future financial endeavours by demonstrating statutory compliance.” Maintain comprehensive financial records, even if your income is nil, as these may be required in future audits. Retain copies of your filing acknowledgement and verification form (ITR-V), Form 26AS, and other relevant documents. Finally, adhere to the tax-filing deadline. “The deadline for an individual’s to file a nil return is July 31, 2023. A belated ITR can be filed until December 31 of the applicable assessment year.”

NIL RETURN WHO MUST FILE?

Individuals: An individual with an annual income less than Rs2.5 lakh is not required to file a nil income-tax return (ITR)

Proprietorship Firm: Proprietorship firms, even those without commercial activity, are mandated to file a nil return if an ITR-3 or ITR-4 form was filed previously

Limited Liability Partnerships (LLPs)

All LLPs registered in India must file an ITR via Form ITR-5, irrespective of annual revenue, profit, or activity.

LLPs not yet operational since incorporation must submit Forms 8 and 11 for the MCA annual return, and also file nil ITR.

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 Filing ITR for deceased person is responsibility   of legal heir

Con sequences of failure to file the return could be penalties, interest, even jail

“The Sixth Sense” immortalised the phrase “I see dead people”. It appears even the tax authorities share this eerie ability. If an individual’s has taxable income, his income-tax-return (ITR) must be filled regardless of his demise. “The representative or legal heir must file the return for the income earned by the deceased until the date of death if the income was taxable.”

Register as legal heir

First, one must first register as a legal heir on the Income Tax (I-T) e-filing website. This involves submitting documents such as the death certificate and legal heir certificate, “Once the documents are submitted the I-T Department reviews the application. If the verification is successful, approval is granted. Given that there can be delays in approval; the process should not be left for the last minute.”

File the ITR

Next, the legal heir can file the ITR in the same manner as the deceased individuals would have, except that the heir must select the option of filing as a legal representative. The appropriate tax liability should be calculated and paid.

Ramifications of non-compliance

The legal heir bears the obligation of meeting the tax liability. However, the legal heir is not personally responsible for settling these dues. “The legal heir’s liability is limited to the extent that the inherited property can cover the outstanding taxes.”

Failure to submit the deceased’s ITR by the deadline can lead to several consequences. “Consequences include loss of exemptions and deductions and potential imposition of interest, penalties, and fines. If the return is not filled by the due date, the assesses will be liable to pay interest under Section 234A for the delay.”Moreover, late filing fees under Section 234F will apply, ranging between Rs 1,000/- and Rs 5000/-, depending on the deceased’s income. Non-compliance can also result in legal complications and disputes with the tax authorities.” In cases of non-compliance or deliberate evasion, the legal heir may face prosecution under Section 276CC of the I-T law. This section outlines the penalties for such failures based on the potential amount of tax evaded. If the tax evasion amount exceeds Rs 25 lakh, the person can be sentenced to rigorous imprisonment of six months to seven years, besides a fine.”

In other cases, the imprisonment term can range between three months and two years, along with a fine.

Club containing income appropriately

The deceased person’s Personal Account Number (PAN) should be surrendered only after completing tasks such as closing bank accounts, transferring assets, settling pending taxes, and filing the ITR.

“The legal representative should write a letter to the assessing officer, providing details of the deceased person, such a name, PAN, date of birth, reasons for surrender, and a copy of the death certificate.” The legal heir or executor bears the responsibility for errors in filing the ITR. “Ensure that all data is gathered accurately before submitting the deceased person’s return.”

If mistakes or omissions are discovered in the original return, it can be revised until December 31 of the relevant assessment year. Segregate continuing income, such as interest, rent, dividends from shares, and gains from investments, which continue even after death. “The deceased’s income up to the date of death needs to be included in his ITR. Subsequently, this income should be clubbed in the ITR of the legal heir.”

Finally, remember that two separate ITRs must be filled for the year of death. “One ITR should be filed by the legal heir for the deceased person’s income from the beginning of the financial year until the date of death. Additionally, the executor should file a second ITR for the income earned by the estate of the deceased from the date of death until the distribution of assets to the legal heir.”

STEPWISE GUIDE TO FILING ITR FOR THE DEPARTED

Calculate income: Determine the income earned by the deceased from the start of the financial year until the date of death.

Open an ITR account: The legal heir must create an ITR account and register as a legal representative on the tax portal using his own login details.

Register as legal heir: Submit the deceased’s documents, including PAN, death certificate, and legal heir proof, for approval.

File the return: After registration and approval, proceed with filing the ITR for the deceased.

Verification and submission: Complete the ITR and verification steps, then submit the return electronically.

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 Moonlighting income: Taxman knows about it, disclose correctly

Maintain record of extra income accurately, failure to report can lead to legal issues, penalty

An increasing number of professional, especially in the information technology (IT) sector, nowadays take to moonlighting to supplement the salary from their full-time jobs with extra income from freelancing consulting or a part-time job.

Those who take this road must understand the tax laws associated with moonlighting income, report their extra earnings accurately, and choose the appropriate form when filling their income tax return (ITR). They must also evaluate whether they would benefits from opting for the presumptive tax scheme (PTS)

“Moonlighting refers to the act of working on a second job or engaging in additional employment, beyond one’s regular or primary job. Often, IT professional undertake freelance projects, consulting gigs, or part-time jobs alongside their fulltime employment. They must bear in mind that income earned through moonlighting is taxable.”

Taxation of moonlighting income

The Income-Tax (I-T) Act doesn’t have any specific provisions for moonlightings. How the extra income is taxed depends on whether it comes in the form of salary, professional fee, or business income.

“The moonlighting income is an additional salary; it is taxed under the head ‘Salary’. The tax rate that applies is based on the relevant slab rates. However, if the moonlighting income is derived from freelance work or professional service, it falls under ‘Profits and gains from business or profession.” This income is subject to the tax applications to business or professional income. Appropriate deduction can also depend on the nature of income. “To include such income in the ITR, the additional income must be shown in ITR-1 if it is a salary ITR-3 if it is income from a contractual relationship, and ITR-4 if the person avails of PTS for income from business or profession.”

Adopt a presumptive tax scheme?

PTS simplifies the calculation and declaration of income for certain professionals, small business owners, and freelancers. “Under this scheme the income is assumed to be a specific percentage of the total turnover or gross receipts.

Varma adds that PTS can benefit people with moonlighting income by freeing them from the burden of maintaining extensive books of accounts. “ If moonlighting individuals income comes from professions specified in Section 44ADA, PTS allows the individuals to be taxed only on 50 percent of her professional fees.” Qureshi adds that showing additional income as business or professional income comes with the advantage that expenses incurred in executing the second job can be claimed as a deduction. 

Maintain records of payments received

Maintain all the relevant records of income earned through moonlighting, including invoices, receipt and payments details, so that you are able to report your income accurately. Failure to disclose any income can lead to penalties and legal issues.

“Familiarise yourself with the deductions and exemptions available under the tax laws, which can help lower your overall tax liability. Consult a tax professional to ensure you claim all of them.” If the moonlighting income was in the form of salary from two employers, obtain Form 16 from both. “Use these From 16 certificates to file your ITR. Also obtain Tax Deducted at Source (TDS) certificates from the employers(s) who have deducted TDS on the moonlighting income. Report It in the appropriate ITR form.”

The I-T Department is aware of the TDS from your side hustle. “The taxpayers should closely monitor Form 26AS, which encompasses the TDS on all of their income.”Any discrepancy between the TDS on all their income sources and the ITR could prompt the tax department to issues a notice.

SELECT CORRECT ITR FORM TO REPORT INCOME FROM SIDE HUSTLE

FORM ITR-10R SAHAJ: Suitable for resident individuals with total income up to Rs 50 lakh, salary from multiple employers, income from a single house property, income from other income sources, and agricultural income up to Rs 5000/-

FORM ITR-2 : For those with capital gains, income exceeding Rs 50 lakh, income from more than one house property, directorship in a company, equity shares in an unlisted company, foreign income, resident but not ordinarily resident or non-resident, having loss brought forward, or loss that needs to be carried forward.

FORM ITR-3 OR ITR-4 : Appropriate for moonlighting income from freelance work or professional services. No income from capital gains, uses ITR -3, Have income from capital gains, use ITR-4

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 Verify pre-file data carefully before filing income-tax return

The income-tax department now provides pre-filled forms filing income-tax returns. (ITRs), which simplifies the process. However, it is important to have the necessary documents on hand to verify the information in the form.

Although there is no requirement to uploaded documents initially, they may be required if an assessing officer investigates. “Keep all relevant documents organised and readily accessible. This will make the filing process smoother and help you avoid missing out on any deductions or inaccuracies in your return.”

Form 16, 16A, and other certificates 

Form 16 is a tax deducted at source (TDS) certificate issued by the employer. Form 16A is a certificate issued by the deductor for TDS on income other than salary. Other TDS certificates include Form 16B for TDS on the sale of property and Form 16C for TDS on rent, etc.

“Check if the TDS certificates reflect the correct amount of tax deducted and if they match the details mentioned in your bank statement and other relevant documents. Ensure that all the TDS certificates are included in your tax return to claim credit for the taxes deducted.”

   Employees should check that Form 16 is digitally signed and that Part A and B are filled correctly. “The assesses should verify that the TDS certificate has been shared by the employer/ another deductor after downloading it from the TRACES portal.”

Interest income and other interest certificates

It is important to collect interest certificate from banks, and post offices, to avail of exemptions under Sections 80TTA and 80TTB. An amount exceeding Rs 10,000/- or Rs. 50,000/-, as the case may be, is taxable in the hands of the assesses. “It is crucial to report all interest income while filing tax returns and keep the interest certificates safely for accurate reporting.”

Note that from 2021-22 financial years FY22, if the interest earned on Employee Provident Fund (EPF) contributions exceeds Rs 2.5 lakh, which is taxable.

Form 26AS

This is a statement that contains all the details of the tax deducted and deposited against your Permanent Account Number or PAN with the government. ”Check if the TDS mentioned in Form 26AS matches the TDS certificates you have received. Cross-check other financial transactions mentioned in Form 26AS to ensure they are correctly reflected in your tax-return.”

Form 26AS can be downloaded through the TRACES portal after logging into the I-T audit.

Annual information statement

The Annual Information Statement (AIS) provides a more detailed view of the information contained in Form 26AS. All the relevant information in the AIS gets pre-filled in the ITR form. “AIS, being a comprehensive statement of taxpayer’s financial transactions that have been reported to the I-T Department, are other important documents that can be referred to while filing ITR to ensure the accuracy of ITR.”

AIS can be downloaded from the I-T portal after logging into the account. The AIS contains information on TDS, tax collected at source, 53 specified financial transactions, and other taxes paid. If there is any error in the AIS or a particular income reflected in the AIS does not relate to the taxpayer, she should report this online.

Investment proof and capital gains details

Individuals can claim tax-savings investment if they opt for the old tax regime. Tax savings are declared and submitted to employers, but if missed, they can still be claimed on ITRs. “ If donations have been made to eligible charitable organisations, collect receipts or certificates in Form 10BE.”

A Form 10 BE is proof of Section 80G deductions.”Apart from this, capital gains earned from the sale of property, shares, and mutual funds have to be reported while filing ITR.”

Keep records of purchase cost, sale proceeds, and expenses (brokerage fees, stamp duty, legal fees).

DETAILS TO BE KEPT HANDY

Bank account details: It is mandatory to provide details to the bank account held by an assesses.

Investment in unlisted shares: Details like date of purchase, face value of shares opening and closing balance, etc.

Aadhaar number: An individual’s is required to quote his/her Aadhaar Number while filling an ITR.

Monthly salary slips: The salary slip amount deducted from your salary and deposited into your salary and deposit into your Employees Provident Fund (EPF) Account.

Interest and principal payment statement for a home loan: The principal amount gets a deduction under Section 80C. The interest on your home loan gets tax benefits under Section 24.

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 If default is imminent, ask lender to restructure loan

Options like swapping higher –cost debt with lower-cost one or debt consolidation will help.

The recently published Financial Stability report of 2023 reveals that retail loans have grown at a compound annual growth at a compound annual growth rate (CAGR) of 24.8 percent between March 2021 and March 2023. Over the same timeframe, the share of unsecured retails loans (expressed as a percentage of total retail loans) rose room 22.9 percent to 25.2 per cent. May 2023 saw credit card spends reach a new high of about Rs 1.4 Trillion.

Media reports suggest that The Reserve Bank of India (RBI) may increase risk weights on unsecured loans, which include personal loans and credit cards, to tamp down their rapid growth. In these times of high inflation, elevated borrowing costs, and jobs losses in certain sectors, borrowers should tread cautiously when availing unsecured loans. And they should act swiftly when they find themselves sliding into a debt trap.

Keep borrowing under control

An individual’s total equated monthly instalments (EMI) on various loans should not exceed 40 percent of net take-home salary. “Assuming around 30 percent of your salary is allocated towards home and car loan EMIs; you retain a buffer of a further 10 percent points for repaying unsecured debt, such as credit card outstanding or personal loan EMIs.

Act before you default

If you are on the verge of defaulting on a loan, communicate with your lender. “The natural impulse is to run away from the lender. That should be avoided,”The vicious cycle of missed payments, late fees, penal interest rates, etc, will cause your loan amount to snowball further.”

Let’s now discuss a few strategies that can help a borrower extricate himself from a debt trap.

Address costliest debt first 

Start by ranking your debts in decreasing order of interest rate, and focus on repaying the most expensive loan first. Consider reducing your EMI next. “Liquidating assets like gold, shares etc, to repay borrowings is a viable way to achieve this”

Go for loan restructuring

Borrowers should also consider restructuring their loans, which means requesting the lender to lengthen the tenure and reduce the EMI. Borrowers should also try to swap higher-cost loans, such as credit card debt (interest rate between 30 and 42 percent), with a personal that might be available for an interest rate between 10 and 20 percent.

“A top-up or an existing home loan can also be utilised to reduce the burden of unsecured debt”

Consolidate your debts

Debt consolidation refers to the conversion of multiple smaller loans into one large loan. ”Securing this larger loan might require you to put up collateral, but the interest rate is likely to be lower and the tenure could be longer, both of which would lead to a lower EMI, “The loan can only be utilised to repay existing loans, all of which must be settled within a specific time-frame. Further borrowing is also not permitted, even in emergencies, “warns Shetty.

Mend your credit score

Those struggling to extricate themselves from a debt trap should consider seeking professional help. Once free from this trap, the focus should shift towards improving one’s credit score.

“Building a good repayment track record is the key to this” Maintain a contingency fund equivalent to six to nine months of household expenditure. “This ensures you won’t need to borrow even during temporary financial troubles, such as job loss or prolonged illness.

 

 

DEBT TRAPS:

SYMPTOMS AND CAUSES

Borrowers taking fresh loans to repay current ones are a classic sign of debt trap

Persistent pursuit by collection agents is another

Regularly running out of cash at the end of the month, leading to additional borrowings are other signs

Not having a budget; borrowings and spending on impulse, without a concrete repayment plan can lead to a debt trap

Forgetting due date for repayment, paying just the minimum amount on credit card

Having too many secured and unsecured loans at the same time

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 Know the final cost of your home

Besides purchase price, consider interest costs, stamp duty & other fees

THE COST OF a piece of property plays a significant role in ascertaining whether you are financially ready to buy a house or must wait some more time to collect enough funds before taking such a big financial decision. Often, only the purchase price of the property is considered to be real cost of owning a home.
However, that is not true especially if you are planning to take a home loan. The actual cost of owning a home involves many hidden expenses beyond the monthly mortgage payments. It is essential to factor in all these costs to avoid financial stress. Also, the cost varies across cities and the type of property you are buying. Let’s shed light on the key factors involved in estimating the true costs of home ownership.

Home loan amount and interest rate

The loan amount depends on the property cost and the down payment made. It’s essential to research and compare loan options offered by different lenders to secure the most favorable interest rates.

Loan tenure and EMI

The loan tenure refers to the duration over which the borrower repays the home loan, In India, loan tenures can range from 5 to 30 years, depending on the borrower’s eligibility and the terms offered by the lender. While longer tenures result in lower EMIs, they also increase the total interest paid over time. It is crucial to strike a balance between affordable monthly payments and minimizing interest costs.

Additional costs

Apart from the property cost and the home loan, there are several other expenses. These include:

Processing fees: Bank charges a processing fee on loan application processing, which is typically aq percentage of loan amount.

Legal and documentation charges: Legal fees and charges for document verification and registration are part of the total costs.

Stamp duty and registration charges: These charges are levied by the government and vary across states. It is important to factor them into the overall cost.

Insurance: Home insurance and mortgage insurance are important to protect the property and the loan.  It is important to consider additional costs such as electricity, water, parking 7 maintenance cost, apart from insurance (optional) & amenities, among other. Theses cost can vary depending on the location and specific requirement.

Prospective homebuyers must carefully evaluate their financial capabilities, research loan options. And factor in additional cost to arrive at an accurate estimation of the total expenditure for owning a home. With careful planning, a prospective homebuyer can make informed decisions and embark on her homeownership journey with confidence.

DO THE MATH

Actual cost of owning a home involves many hidden expenses beyond the EMIs.

Know how much money you need now and what will be needed in the future when you start repaying the loan.

Loan processing fees, insurance, registration & legal charges can add up to a tidy sum.

 

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Senior citizens must disclose all form of income in ITR 

Review Form 26AS and Annual Information Statement to see if you are eligible for refund of TDS

Indian tax laws offer a number of benefits to senior citizens who should be aware of them at the time of making tax-savings investments and filling their Income Tax Return (ITRs). They should avoid a few common mistakes while carrying out the latter task.

Who is a senior citizen?

These are two categories for tax purpose: senior citizens and super senior citizens. “Resident individuals aged 60 years or more (but below 80 years) during the year are classified as ‘senior citizens’, while resident individuals aged 80 years or more during the year are classified as ‘super senior citizens’, The basic exemption limit is 3 lakh for senior citizens.

Report all forms of income

Many senior citizens fail to disclose certain incomes like interest commissions, or dividends in their ITRs.

“Report all types of income in the ITR, regardless of the amount or whether tax has been deducted from it. Non-disclosure of income will be considered as under-reporting. It could also result in penalties and scrutiny by the tax department “

Claim sections 80TTB, 80C deduction

Resident senior citizens can claim an enhanced deduction of up to Rs 50,000/- under Sections 80TTB of the I-T Act against interest earned on fixed deposits, savings accounts of commercial banks, cooperative banks, and post offices.

“Those who have invested in Senior Citizens Savings Scheme should avail of Section should avail of Section 80C deduction”

Income from properties

Sometimes, children of senior citizens pay rent to their parents and claim house rent allowance (HRA). Such parents should include the rent they receive in their ITRs.

A senior citizen who owns more than two residential properties may consider two as self-occupied and treat the rest as ‘deemed let-out’. “Senior citizens must compute the notional income on such deemed let out property. This income will be subject to taxation under the head ‘income from house property’ in their ITRs.”

Exemption from filling ITR

Filling an ITR is not mandatory for senior citizens who only have income from bank deposits, which is below the basic exemption limit. But they must file an ITR if they qualify for tax refund.

Many seniors assume they don’t need to file return if tax has been deducted at source (TDS) from their income receipts. Exemption from return filing is subject to several conditions: the senior citizen should be 75 or above; he should be a ‘resident’ in the relevant financial year; he should have pension and interest income only; and his interest income should accrue from the same specified bank in which he receives his pension.

Standard deduction on pension income

A standard deduction of up to RS 50,000/- can be claimed against salary and pension income under Section 16 (ia) of the I-T Act. Effective from FY 2022-23, pensioners opting for the new tax regime can also claim this standard deduction.

Claim TDS refund

Senior citizens need to heed a few points while filing their ITRs. “A very senior citizen aged 80 year or more filing ITR in Form SAHAJ (ITR-1) or SUGAM (ITR-4) and having a total income of more than Rs 5 lakh, or having a refund claim, can file ITR in paper mode, i.e., electronic filing is not mandatory.”

Senior citizens aged 60 years or more don’t need to pay advance tax if they don’t have income under the head, “Profit or gain from business or profession”.

Before filing their ITRs, senior citizens must review Form 26AS and the Annual Information Statement to check if any TDS has been deducted on their income. If their income is below the taxable limit, they will be eligible for a refund of this amount.

“Even if capital assets are sold and the entire gains reinvested, they must report their capital gains in the ITR. This will allow them to claim refund of the TDS deducted on sale of property”.

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