Senior citizens with a total income below the taxable limit are not obligated to file income tax returns (ITRs). However, many senior citizens relying on income from fixed deposits (FDs) alone often wonder if they must file their income tax returns. Individuals who are 60 years of age or older on the first day of the assessment year are considered senior citizens.
Senior citizens whose income comprises solely of fixed deposit earnings below the basic exemption limit are not mandated to file an ITR. However, they should do so to claim a refund of the excess Tax Deducted at Source (TDS) on the interest earned from those deposits.
For the Assessment Year (AY) 2023-24, the basic exemption limit for senior citizens under the old tax regime is ₹3 lakh. However, under the new tax regime (under Section 115BAC), this limit is reduced to ₹2.5 lakh.
For instance, if a senior citizen has a total income of ₹3 lakh and has earned ₹50,000 in interest income from fixed deposits, the bank will not deduct any TDS on the interest income. As per the rule, the bank does not deduct TDS up to an interest income of ₹40,000 under Section 194(A) of the Income Tax Act for individuals and up to ₹50,000 for senior citizens.
However, some banks tend to deduct TDS on interest income above ₹40,000. In such a scenario, the TDS would amount to ₹1,000. The senior citizen can claim a refund of ₹1,000 TDS by filing an ITR.
Understanding the significance of tax payments is essential; if an individual pays more tax than their actual liability, the excess amount qualifies as an “income-tax refund”. This refund can be claimed by filing the ITR. Thus, those eligible for the tax refund must submit their ITRs to receive the refund amount.
Hence, senior citizens who have had tax deducted from their interest income must file their ITRs to claim the TDS refund. The deadline to file the ITR for these senior citizens with only FD income is July 31, 2023.