Individual taxpayers have received some relief from the finance minister with the introduction of a standard deduction of Rs 50,000 and a deduction of up to Rs 15,000 from family pensions under the new tax regime.
This is a significant benefit that was previously only available to salaried individuals under the old tax regime. Additionally, the Budget 2023 has broadened the tax benefits for salaried individuals earning Rs 15.5 lakh or more, who can now gain Rs 52,500.
All salaried taxpayers, including those who receive pension income, can now claim a maximum deduction of up to Rs 50,000 under Section 16(ia) of the Income Tax Act of 1961. The deduction was previously only allowed for taxpayers who opted for the old tax regime.
However, the Budget 2023 proposes to allow such a deduction for taxpayers who choose the proposed new tax regime under Section 115BAC of the IT Act in the financial year 2023-24. The standard deduction is claimable while furnishing the tax return in ITR 1/ITR 2.
Pension taxes are part of the statutory deduction for income tax purposes. Seniors and super seniors who receive pensions can select between the old and new tax regimes under the relevant categories and tax slabs. Senior citizens are those under 80, and they are only eligible for basic exemptions up to a total of 3 lakhs. In contrast, super senior citizens are those over 80 and are exempt from taxes up to a total of 5 lakhs yearly on total income. Pensioners may deduct up to 50,000 per year or the sum of their pension, whichever is less, under Section 16 of the IT Act.
It is important to note that self-employed individuals are not eligible to claim the standard deduction of Rs 50,000. Despite the significant tax obligations on pensions in India, taxpayers can reduce their liabilities by understanding the basic deduction, tax slabs, deductions, and reinvestments under the IT Act. To ensure a comfortable retirement, early financial planning is critical.
