A heavy tax on the elderly

Kamal Baruah 
The protest is part of their campaign against deducting TDS - Tax Deducted at Source from pensioners, where senior citizens are not eligible for medical insurance, loan on EMI, Driving License and even jobs for infirmity. On the other hand Government spends crores of rupees on irrelevant social schemes to woo voters but their demand is genuine for all pay taxes for their survival especially while spending half of the pension amount on medicine and home/health care besides household needs.
Income Tax is applicable for who survive and make ends meet through pension after retirement age and to widows and disabled people. Surprisingly it provides exemption of Tax to Members of Parliament and State legislators in respect of their daily allowances in entirety and also there is nil TDS on their pension. People classified as Scheduled Tribe residing in a Sixth Schedule area are exempted from paying income tax.
Pension received on gallantry awards of Armed Forces and NPS – National Pension Scheme are also exempted. Armed forces pension from United Nations Organization under UN privilege and immunities is exempted. It is imperative to note that TDS is not deducted on family pension as the latter does not come under the ambit of Income Tax.
It is heartening to see that TDS provisions are applicable under the head of salary. Under Section 60 of the CPC and section 11 of the Pension Act, pension is described as an allowance. While pension is paid on a monthly basis, there is also an option of receiving tax exempted lump sum in the form of commuted pension. On the other hand, pension paid on a periodical basis i.e. uncommuted pension is fully taxed.
Nationalized banks are allowed deductions and grant relief for any pension arrears. And pension amount is deducted from the beginning of the Financial Year (FY) itself. Ironically there is no scope for earmarking investment for the very first month as March pension is credited on the first working day in April. Thereby all taxable pensioners contribute TDS at least a month to raise the revenue of ITO’s exchequer. Shouldn’t the department give a fair chance to submit investment details for at least a month ?
Pension income is taxed as salary income, whereas the interest on various investments is taxed as income from other sources. When it comes to Pension Provident Fund (PPF), the interest income is tax-exempt. If the pensioner’s taxable income i.e., pension in addition to taxable interest minus investments such as PPF, health premium which are eligible for deduction, is above the exemption limit in an Assessment Year (AY), he is liable to file ITR.
ITR Forms now comes filled up in advance in order to execute the filing of ITR in a quick manner. The fields are set to be pre-filled with details of salary income, tax payments, TDS, etc. Taxpayers also expect the details like capital gains from listed securities, dividend income, and interest from banks, post office, etc. to be pre-filled from this FY 2020-21. Besides there are tax reforms such as Standard Deduction of Rs 50,000, interest income and medical expenses that intends to offer benefits. At the same time government is concerned forgiving exemption of filing ITR for citizens above 75 years who only have pension and interest as a source of income. The paying bank will deduct the necessary tax on their income.
Senior citizen can choose to pay income tax under an optional new tax regime. The New Tax Regime is available with lower tax rates and zero deductions/exemptions. New Slab Rates 5%, 10%, 15%, 20%, 25%, 30% for 2.5L to 5L, 5L to 7.5L, 7.5L to 10L, 10L to 12.5L, 12.5L to 15L, income above 15Lakh  respectively against existing Slab Rates of 5%, 20%, 30% for 3L to 5L, 5L to 10L and income above 10Lakh. All they just need to switch over the Tax Regime in the time of submitting ITR form by clicking a push button on the computer and compare/analyze from both the tax regime.
Senior citizen needs to invest the hard earned lifetime savings in such a way that it fetches a regular income that may explore and diversify across them to keep returns, safety and liquidity under control. In a falling interest rate scenario, fixed incomes on deposits are hit the most.  The interest income earned is also fully taxable, and TDS is applicable if interest is more than Rupees50,000 per year. The drop in the returns from investments in the last few years means that senior citizens require a bigger corpus to receive the same returns.
They typically park their investments and withdrawn annuities in Senior Citizen Saving Scheme (SCSS), Pradhan MantriVayaVandanaYojana (PMVVY), Post Office Monthly Income Scheme (POMIS), Bank Fixed Deposits (FD) and Floating Rate Savings Bonds that provide monthly or quarterly interest pay-outs.
(To be contd)