If you are a senior citizen and you do not have any kind of business income, you have reasons to celebrate. The Union Budget has proposed that senior citizens, who do not have any income from a business, would be exempted from payment of advance tax.
An advance tax is the tax you pay in a lump sum if your tax is not deducted at source from your salary or have earnings that merit a higher level of taxation. Ideally, an individual is required to pay advance tax on three prescribed dates every fiscal—by 15 September, at least 30% of tax needs to be paid on total income for the year; by 15 December, at least 60% of tax is to be paid on total income for the year less advance tax already paid; by 15 March, 100% of tax on the total income for the year less advance tax already paid. Whatever remains, needs to be settled at the time of tax filing.
Says Anil Rego, chartered accountant and CEO of Right Horizons, an investment advisory and wealth management firm, “This is a welcome move, since it would make the life of senior citizens not having income from business simpler. Keep in mind that the senior citizen will have to pay tax, but he won’t have to go through the pain of paying advance tax three times a year.”
Does this move have a monetary benefit? Advance tax is applicable on all individuals, salaried or otherwise, with an advance tax liability of Rs 10,000 or more earned during a fiscal year. Normally, in case you owe advance tax and you have failed to pay that by the due date, you are charged a simple interest of 1% per month, if the advance tax payments in the prescribed time frames are less than the required percentage. However, if you settle, say, 90% of your advance tax on the last instalment date and didn’t file returns till 31 July, you will have to pay 1% simple interest per month on the remaining 10% advance tax, according to rules.
However, this may not result into a huge benefit for senior citizens as such. Rego says, “From the monetary point of view, the senior citizen won’t be able to save much money.” But, nevertheless, the move is welcome.