Senior citizens: who they are and the rates for 2016-17 (as set, 1961 Act, AY 2017-18)

Who is a senior citizen

For income-tax, a senior citizen is an individual who is resident in India and who is 60 years of age or more at any time during the previous year. The Act uses this meaning where it gives senior citizens a separate rule: the Explanation to section 80D (health insurance) and section 207(2), which frees a resident individual of 60 or more who has no business or professional income from paying advance tax. Two points follow:

• Age is tested at any time in the previous year, so a person who turns 60 on any day up to 31 March 2017 is a senior citizen for the whole of 2016-17.
• Residence is a condition: a non-resident of 60 or more is taxed at the ordinary rates for individuals.

Within this group, a resident individual of 80 years or more at any time during the previous year (a very senior citizen) has a higher exemption limit (Finance Act, 2017, First Schedule, Part I, Paragraph A, item (III)).

Rates of tax for the financial year 2016-17

The rates are not in the 1961 Act itself; each year's Finance Act sets them, here the Finance Act, 2017, section 2(1) and Part I of its First Schedule, for income of the previous year 2016-17 (assessment year 2017-18) (Finance Act, 2017, First Schedule, Part I, Paragraph A).

For comparison (Finance Act, 2017, First Schedule, Part I, Paragraph A, item (I)), the exemption limit for other resident individuals that year is ₹2,50,000, so a senior citizen saves up to ₹5,000 of tax and a very senior citizen up to ₹25,000 before cess.

Surcharge, cess and rebate

• Surcharge: 15% of the tax where the total income exceeds ₹1 crore, with marginal relief so that the extra tax does not exceed the income above ₹1 crore (Finance Act, 2017, First Schedule, Part I, Paragraph A, Surcharge on income-tax).
• Cess: education cess at 2% and secondary and higher education cess at 1% on the tax (with any surcharge) (Finance Act, 2017, section 2(11) and (12)).
• Rebate: a resident individual whose total income does not exceed ₹5,00,000 gets a rebate of the whole tax or ₹5,000, whichever is less (section 87A, as amended by the Finance Act, 2016, section 46; for assessment year 2017-18 the amount is ₹5,000, as its amendment footnote shows: Act 28 of 2016 raised it from ₹2,000 with effect from 1-4-2017). The rebate is taken before cess.
• Special rates still apply on their own terms, for example 20% on long-term capital gains (section 112), with any unused exemption limit set against those gains for a resident individual.

Example

Mrs. Kamla, resident, aged 66, has a total income of ₹6,40,000 for the previous year 2016-17. Tax: ₹20,000 on the slab from ₹3,00,001 to ₹5,00,000, plus 20% of ₹1,40,000 = ₹28,000, so ₹48,000. No rebate (income above ₹5,00,000). Cess at 3% = ₹1,440. Tax liability ₹49,440 (Finance Act, 2017, First Schedule, Part I, Paragraph A, item (II)).