Advance Tax for Senior Citizens: Understanding and Managing Advance Tax

Advance Tax for Senior Citizens: Knowing about taxes is essential for managing your money, especially if you are older. Understanding advance tax is essential for retired people who rely on fixed incomes. In this guide, we will discuss the advance tax for senior citizens. We’ll explain exactly what it is, how it works, and how seniors should handle it. Taxes can be overwhelming, whether you’re a retiree or a newbie. With the right information, seniors will be able to make better financial decisions and feel more confident. Let’s learn about the advance tax for senior citizens!

Advance Tax Exemption for Senior Citizens

Every taxpayer who has a tax liability exceeding Rs. 10,000 for the year before the year of assessment is required to pay advance tax. Senior citizens can now opt to pay no advance tax if they meet certain conditions.

An Overview of Advance Tax Exemption

According to Section 208 of the Income Tax Act, every taxpayer or assessee with a tax liability above Rs. 10,000 for the previous year to the assessment year must pay advance tax. There are exemptions for senior citizens. Senior citizens who don’t run a business or have a job are exempt from paying advance tax.

Understanding Senior Citizens’ Advance Tax Exemption

Section 207, which was ratified during the financial year 2012-2013, states that senior citizens do not have to pay any advance tax if the following conditions are met:

• Senior citizens are individuals
• The senior citizen in question resides in India
• Senior citizens are individuals who are 60 years of age or older
• The senior citizen has no income that can be charged to the heading – Profits and Gains of Business or Profession

Section 207’s Advantage for Senior Citizens

The ratification by the Income Tax Act of Section 207 allows or permits a senior citizen to avoid his tax burden through the payment of self-assessment tax. This applies to all tax liabilities, except for Tax Deducted at Source (TDS).

Read This Also: Budget 2024: A Closer Look at India’s Budget 2024

Examples Where Advance Tax Payment is Waived

The following examples will help you better understand the exemption of advanced tax payments for senior citizens:

Example 1:

• Mrs. Robinson is an Indian resident and retired. She is 68 and earns Rs 35,000 per month from the rental of her apartment. She has no other source of income except for rent. According to Section 208 of the Income Tax Act, Mrs. Robinson will be required to pay an advance tax. In Mrs. Robinson’s case, she won’t be required to pay an advance tax as she meets the criteria under Section 207. Since Mrs. Robinson meets all the criteria set out in Section 207, she won’t be liable to pay any tax in advance.
  • She is a resident of India as per the Income Tax Act
  • She is an individual
  • She is over 60 years old
  • She does not earn any income that falls under the category of profits from business or profession

Example 2

• Mr. Joshi, a resident of India, has recently retired from the field of his work. He is 54 and earns Rs 47,000 per month from the rental of his house. This is his only source, as he does not have any other income. Will Mr. Joshi have to pay any advanced tax? As per Section 208 of the Income Tax Act, an assessee has to pay advance tax when his or her taxation liabilities for the previous year exceed Rs 10,000. According to Section 207 of the Income Tax Act, an assessee is not required to pay an advance tax if they meet certain conditions: Mr. Joshi meets most of the criteria listed above, but he is still below the minimum age of 60 to be exempted from paying tax in advance. In this case, Mr. Joshi will not be considered a senior citizen, as prescribed by the Income Tax Act. He will therefore be liable to pay taxes in advance for the entire year.
  • The person is a resident of India as defined by the Income Tax Act
  • The individual is the person
  • The person must be at least 60 years of age or older
  • The person does earn income that can be charged to the heading – Profits or gains of business and profession

Example 3

• Mrs. Patel, a resident of India, has recently retired. She is 62 and earns Rs 41,000 per month from the rental of her flat. She opened a small business after retiring. According to Section 208 of the Income Tax Act, an assessee must pay advance tax when his or her taxation for the previous tax year exceeds Rs 10,000. According to Section 207 of the Income Tax Act, an assessee is not required to pay an advance tax if they meet the following conditions: Mrs. Patel meets most of the criteria listed above, but she earns income in the category ‘Profits and Gains of Business or Profession’. This means that she will have to pay her tax in advance.
  • The person is a resident of India as defined by the Income Tax Act
  • The individual is the person
  • The person must be at least 60 years of age or older
  • The person does earn income that can be charged to the heading – Profits or gains of business and profession

Example 4

• Mr. Rahul is currently retired and a non-resident of India. He is 67 and earns Rs 35,000 a year by renting an apartment in Bangalore. He does not have another source of income. He currently lives in the United States of America. According to Indian Income Tax laws, will Mr. Rahul have to pay any taxes in advance? As per Section 208, an assessee must pay advance tax when his or her taxation liabilities for the previous year exceed Rs 10,000. Section 207 of the Income Tax Act states that an assessee is not required to pay an advance tax if they meet certain conditions: Mr. Rahul meets all the criteria above, except for his residence status. Mr. Rahul is immediately disqualified from claiming any exemptions under Section 207 because he is a non-resident. This means that he must pay tax in advance.
  • The person is a resident of India as defined by the Income Tax Act
  • The individual is the person
  • The person must be at least 60 years of age or older
  • The person does earn income that can be charged to the heading – Profits or gains of business and profession

Example 5

• Matthuga Private Limited manufactures stationery for schools and colleges. The company has closed its business recently and now earns Rs 52,000 a month from the rental of the property it owns in Mumbai that it has rented to another business. According to Section 208 of the Income Tax Act, a company is required to pay in advance if its tax liability for the prior year exceeds Rs 10,000. Section 207 of the Income Tax Act states that an assessee is not required to pay an advance tax if they meet certain conditions: In this case, since the entity in question does not represent an individual, no exemption is allowed. The company will therefore be required to pay its tax in advance.
  • The person is a resident of India as defined by the Income Tax Act
  • The individual is the person
  • The person must be at least 60 years of age or older
  • The person does earn income that can be charged to the heading – Profits or gains of business and profession

Read This Also: How To Choose the Right CA Firm in Mumbai?

FAQs – Advance Tax for Senior Citizens

Should seniors pay advance tax on income from pensions?

No, income from pensions for seniors over 60 years old does not require an advance tax.

Should seniors pay tax on interest earned from fixed deposits?

Senior citizens over 60 years old do not have to pay advance tax on interest earned from fixed deposits.

Does Section 207 of the Income Tax Act apply to Hindu undivided families?

No, Section 207 allows exemption from payment of tax in advance only for senior citizens. A HUF cannot claim tax exemptions under this section.

Can a person who reaches 60 years of age during the year, claim exemption from the payment of advance tax under 207?

Yes, a resident of India who reaches the age of 60 or more in any given year and does not earn income under the heading “Profits and gains from business or profession” will not have to pay tax for the entire year.

Can I get a refund of the advance tax if my retirement age is less than 60 years old?

You will not be exempt from advance tax as only those over 60 years old are eligible.