6 Ways In Which Senior Citizens Can Reduce Their Capital Gains During ITR Filing

It is common for aged citizens to rely on their investments and savings to meet their day-to-day needs as they have no fixed source of income post-retirement. However, when assets are liquidated like property, mutual funds, or even stocks by senior citizens, it comes with having to pay capital gains tax on the profit earned on the sale. However, some amount of the tax which is to be paid on capital gains is unavoidable, let us know how. 

6 Ways To Save Up On Capital Gains Tax

Enhanced Basic Exemption Limits: 

• Senior citizens aged between 60-80 years old are allotted a basic exemption limit for capital gains, which is at Rs. 3 lakh per annum.

• Super senior citizens, that is, people above the age of 80 years, are allotted an exemption limit that is comparatively higher which is at Rs. 5 lakh per annum.

• Capital gains within these limits remain tax-free for senior citizens.

Tax Benefits On Short-Term Capital Gains:

• Capital gains of a short-term nature acquired from the sale of equity and equity mutual funds receive a 15% tax on them.

• If the total income, with the exclusion of the short-term gain, is still below Rs.3 lakh or Rs.5 lakh for the respected age group, then the unused basic exemption can be used against short-term capital gains.

Lower Slab Tax Rates Under The Nex Tax Rules:

• Senior citizens can choose to opt for lower income tax slabs and also rates which range from 5%-2-% under the new tax system 

• This new taxation system helps the senior citizens in their goal to reduce their capital gains as it effectively brings down the tax rate on the capital gains imposed upon them. 

Indexation Benefit On Long-Term Capital Gains:

• Assets which are held over for more than 24 months get their long-term capital gains calculated only after adjusting the purchase cost to indexation.

• This substantially reduces the gains subjected to a maximum of at least 20% imposed.

Exemption For Reverse Mortgage Loans:

• The monthly amounts received from banks against property through ways of reverse mortgages are deemed tax-free for senior citizens, helping them cut costs and not lose money to complicated taxation clauses.

Benefit Of Carry Forward Losses:

• Capital losses can be set off against capital gains of the same type for the current as well as for a grand duration of the next 8 assessment years.

Along with these, deductions such as interest on home loans up to Rs. 2 lakhs also work in favour of the senior citizens as they help them save taxes on the capital gains imposed. 

With proper planning and education, the senior citizens can significantly lower their capital gains tax which they have to pay.

Conclusion

The Indian tax system provides exemptions especially for senior citizens to prevent double taxation and to help meet their regular incomes post-retirement. 

By making the most of the available deductions and exemptions, senior citizens can maximise their savings and reduce the tax liability on capital asset sales. Proper understanding and usage of these provisions will allow them to save taxes.

Readers can call the Income Tax Department toll-free number 18001030025 for any query or for complete information on senior citizen ITR rule click here.