New income tax rule for senior citizens; Here’s all you need to know

The CBDT has revised the rules applicable in case of filing of Form 15 H. The new rule applicable for the financial year 2019-29 takes into account the provision of section 87A and thus allows even those taxpayers who are eligible for rebate under Section 87A. “CBDT has notified that the Form 15H declaration will cover the Section 87A rebate. The new income tax rule provides that the declaration in Form 15H can be accepted from the person whose income is higher than the basic exemption limit, i.e. Rs 3 lakh (as 15H is applicable to persons aged above 60 years), but is eligible for Section 87A rebate where tax liability will be nil after taking in account Section 87A,” says Archit Gupta, Founder & CEO, ClearTax.

A senior citizen is granted a higher exemption limit compared to non-senior citizens. The exemption limit for the financial year 2019-20 available to a resident senior citizen is Rs. 3 lakh.

The new rule will benefit those senior citizens whose tax liability will be Nil after allowing rebate under Section 87A. “Those who have interest income as the only source of income will stand to benefit from this change. Which means if they are able to keep their total taxable income within Rs 5 lakh, they will face no tax and will be eligible to file Form 15H,” informs Gupta. The new rule will help reduce the running around for tax refund for those who now become eligible for submission of Form 15 H.

The Form 15 H is a declaration under section 197A(1C) of the Income Tax Act, to be made by an individual who is of the age of sixty years or more claiming certain incomes without deduction of tax, i.e. TDS. Such a form needs to be submitted to any institution such as a bank which deducts TDS if interest income exceeds Rs 50,000 a year ( Rs 40,000 for non-senior citizens). There is no change for those required to fill Form G is the declaration form for no senior citizens for claiming certain incomes without deduction of tax.

According to the income tax rules, Section 87A states that, “An assessee, being an individual resident in India, whose total income does not exceed Rs 5 lakh, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of Rs 12,500, whichever is less.”

Here is what the notifications states – “Provided that such person shall accept the declaration in a case where income of the assessee, who is eligible for rebate of income-tax under Section 87A, is higher than the income for which declaration can be accepted, but his tax liability shall be nil after taking into account the rebate available to him under the said section 87A.”

It means the assessee whose income is above the exemption limit but is eligible for rebate under Section 87A and where the tax liability is nil, may still file the Form 15H.

The benefit of Section 87 A is available to assessee only when these three conditions are met in the financial year 2019-20 – Firstly, it is only for resident individuals, secondly, the total income after taking into account any deductions, has to be below Rs 5 lakh and thirdly, the maximum rebate allowed will be Rs 12500.