The Finance Minister has provided some relief to individual taxpayers by introducing a standard deduction of ₹50,000 and a deduction of up to ₹15,000 from family pensions under the new tax regime. This benefit was previously only available to salaried persons under the old tax regime. The Budget 2023 has also widened tax benefits for salaried individuals earning ₹15.5 lakh or more, who stand to gain ₹52,500. Every salaried taxpayer can seek a maximum deduction of up to ₹50,000 under Section 16(ia) of the Income Tax Act of 1961. This standard deduction is now available to taxpayers who receive pension income as well.
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It is worth noting that this standard deduction was previously only allowed as a deduction to taxpayers opting for the old tax regime. However, the Budget 2023 now proposes to allow such a deduction for taxpayers opting for the proposed new tax regime under Section 115BAC of the IT Act in the financial year 2023-24. Taxpayers can claim the benefit of standard deduction while furnishing their tax return in ITR 1/ ITR 2. The amount of standard deduction is auto-populated in the Income tax online return/utility once the amount of gross salary/pension is rightly entered by the taxpayers. Taxpayers should verify that the aforementioned reduction is correctly calculated from Part B’s Gross Total Income schedule’s Point iv (a) Standard deduction under Section 16(ia).
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Pension is a crucial form of income for retirees, but there are tax obligations associated with it. Pension taxes are computed as part of the statutory deduction for income tax purposes. Seniors and super seniors who receive pensions can choose between the old and new tax regimes under the proper categories and tax slabs. Super senior citizens are those who are over 80, while senior citizens are those who are under 80. Senior citizens are only eligible for basic exemptions up to a total of 3 lakhs, but super senior citizens are exempt from taxes up to a total of 5 lakhs yearly on total income.
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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. This reduction has made it easier for seniors to pay their bills. Even more tax savings can be achieved by looking into choices like NPS, PF, FDs, and other insurances. Despite the sizeable tax obligations on pensions in India, taxpayers can lessen their obligations by comprehending the basic deduction, tax slabs, deductions, and reinvestments under the IT Act. To guarantee a comfortable retirement, we therefore stress the significance of early financial planning for retirement.
It is worth noting that self employed individuals are not eligible for the claim of Rs 50,000 standard deduction.
