Advance tax is paid in advance by an assessee whose tax liability exceeds Rs. 10,000 in the year prior to the assessment year. However, as per the latest amendments, senior citizens can choose to not pay advance tax if they fulfil certain conditions. Let’s explore the provisions of advance tax for senior citizens.
The government has been striving to make tax compliance easy for seniors. In the FY 2012-2013, Section 207 was included to focus on exemptions on advance tax for senior citizens. It states that senior citizens do not have to pay advance tax if the following conditions are satisfied:
He/she is an individual
He/she is an Indian resident
His/her age is 60 and beyond
He/she doesn’t earn any income under the head ‘Profits and gains of business or profession’
While Section 207 eliminates the burden of paying advance tax, it also permits a senior citizen to waive his/her tax burden through the payment of self-assessment tax. This is applicable on all income tax liabilities except TDS.
Let’s understand the provisions of advance tax for senior citizens with examples.
Example 1:
Mr. Verma, a 66-year-old retired man earns ₹30,000 as rent for his apartment in Mumbai. He doesn’t earn any income under other heads except ‘Income from rent’. Now, though the Income Tax Act demands you to pay advance tax if your liability for the previous year exceeds Rs. 10,000, Mr. Verma can forgo advance taxation. Here’s why:
He is an individual
He is an Indian resident
His age is 60 and beyond
He doesn’t earn any income under the head ‘Profits and gains of business or profession’
Example 2:
Mrs. Patel, a 59-year-old Indian resident woman earns ₹25,000 from interest on FD. She receives no additional income from other sources. Yet, she cannot forgo advance taxation. Out of the 4 conditions, Mrs. Patel doesn’t fulfil one—her age is not 60 or more.
Example 3:
Mrs. Pathak is a 65-year-old retired Indian resident. Post retirement, she started a food business and earns ₹35,000 through it per month. However, despite being 65 years old, she is not eligible for advance tax exemption for senior citizens provided under Section 207. Out of the 4 conditions, Mrs. Pathak doesn’t fulfil one—she earns income under the head ‘Profits and gains of business or profession’.
FAQs on Advance Tax Exemption for Senior Citizens
Is Section 207 of the Income Tax Act applicable for HUFs?
No. Section 207, i.e. the provisions of advance tax for senior citizens, is only applicable for individuals.
Can a non-resident senior citizen avail the benefits of Section 207?
No. Section 207 only applies to resident senior citizens.
What is advance tax?
Advance tax allows you to pay tax in instalments instead of making a lump-sum payment during the year end.
Should a senior citizen pay advance tax on pension?
A senior citizen receiving pension doesn’t have to pay advance tax.
Will I be exempted from advance tax if I am retired but not a senior citizen?
No. You have to be a senior citizen to be exempted from advance tax.
Is Section 207 applicable to income tax for senior citizens?
Yes, Section 207 of the Income Tax Act exempts resident senior citizens aged 60 or above from paying advance tax if they have no income from a profession or business. This provision eases the tax burden, particularly for those relying on pensions.
What does Section 207 cover in income tax?
Section 207 of the Income Tax Act covers the payment of advance tax. It requires taxpayers to pay advance tax if their tax liability is ₹10,000 or more during the financial year.
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