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Many retired people are confused about whether advance tax has to be paid on pension, bank interest or capital gains. There is a special exemption for senior citizens in the tax rules, which many people are not aware of. Experts say that under certain conditions the elderly have to pay the entire tax at the end of the year itself and not in advance.
New Delhi. Many retired people depend only on pension, bank FD/RD interest, dividends and capital gains. In such a situation, the question arises whether it is necessary to pay advance tax on these sources of income? According to experts, if a person’s tax liability after deducting TDS is more than Rs 10,000, then he has to pay advance tax. But there is a big relief for senior citizens (age 60+) that if they do not have any business income, then they do not need to pay advance tax. They can pay their full tax at the time of filing ITR only.
Special discount for senior citizens
The government has given this big benefit to reduce the burden on elderly taxpayers. According to experts, people above 60 years of age who do not have any business income – such as futures and options (F&O) trading or intra-day, do not need to pay all four installments of advance tax. Be it pension, interest, dividends or long and short term capital gains – they get the facility to deposit the entire tax in one go at the end of the year.
How is advance tax determined on capital gains?
If there is no senior citizen and there is LTCG/STCG of ₹1 lakh each in the first three quarters, and a loss of Rs 2 lakh in the third quarter, then the loss is set-off on FIFO (first earned, first adjusted) basis. In such a situation, advance tax will have to be paid on tax of Rs 1 lakh till the third installment. If a person misses all the installments, interest and penalty is applicable. But this rule also does not apply to senior citizens – they do not have to pay any advance installment, no matter what the capital gain is.
Who should do what?
Tax experts advise that if you are a senior citizen and your income comes only from pension, interest or capital gains, then there is no need to worry about advance tax. But if you earn from business income or trading activity, then like normal taxpayers, you will have to pay advance tax. At the same time, non-senior citizens should be prepared for interest and penalty if they do not pay the installments on time. Understanding this rule and making proper planning helps in saving and reducing stress.
