Retired? 7 types of income that are taxable for senior citizens; know the rules

An uncommuted pension received after retirement is generally taxable as salary income in the hands of the retiree. A standard deduction may be available, depending on the applicable provisions and the tax regime chosen.

Interest earned from savings accounts, fixed deposits (FDs), recurring deposits (RDs), post office deposits and the Senior Citizens’ Savings Scheme (SCSS) is taxable. Senior citizens opting for the old tax regime can claim a deduction of up to Rs 50,000 for qualifying interest income under Section 80TTB. This deduction is not available under the new tax regime.

Rental income from a let-out residential property remains taxable post-retirement. A 30% standard deduction and other permissible deductions, such as eligible home loan interest, may be available wherever applicable. Commercial property given on rent is also subject to a similar tax framework, except for certain aspects.

Gains from the sale of shares, mutual funds, immovable property or other capital assets are taxable based on the nature of the asset, period of holding and applicable capital gains provisions. Retirees should report the correct sale and capital gains figures in their ITR, particularly when redeeming mutual funds, switching schemes, selling listed shares or selling real estate. Such transactions are generally reported in the Annual Information Statement (AIS).

Annuity and insurance pension: Pension or annuity received from insurance companies is generally taxable in the year of receipt.

Dividend income: Dividends are taxable in the hands of the shareholder. Therefore, retirees should track these investment-linked incomes even after their salary stops.

Retirees should also keep track of:
● Interest accrued on cumulative fixed deposits
● Interest on income-tax refunds
● Family pension received by a spouse or legal heir
● Income from consultancy or part-time professional assignments
● Taxable withdrawals from certain investment products
● Gains arising from mutual fund switches or redemptions
● Notional rental income where more than one house property is treated as self- occupied beyond what the law permits

Submitting Form 15H only prevents TDS from being deducted on FD and other deposit interest where the required conditions are satisfied. It does not make the income exempt from tax. Form 15H can be submitted only when the taxpayer's total income results in nil tax liability, subject to the specified conditions.

Even if tax liability is nil, you may still need to file an ITR, including to claim the enhanced Section 87A tax rebate, wherever applicable.