Tax reckoning in the year of retirement

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This discussion clarifies tax implications for an individual retiring in June 2020. They will be considered a senior citizen for the financial year 2020-21, impacting tax slabs. The advice leans towards sticking with the old tax regime if income is below £12.5-£15 lakh, due to enhanced senior citizen limits and various deductions like 80C, 80D, and 80TTB. Even with multiple employers in the year, the £1.5 lakh 80C benefit can be claimed in full. For fluctuating incomes or incomes exceeding £15 lakh, the old regime remains the recommended choice.

Nand

Nand (Querist)
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05 April 2020 Dear Sir,
I am due for retirement in June 2020 on attaining 60 years. So, for the FY 2020-21, whether I would be considered as Senior Citizen for IT rates ? How the 80C benefit would be reckoned if I invest 1.5 lacs.. Is it advisable to go for
new regime or to continue in old regime for the FY 2020-21 ? Kindly clarify.

VIJAY KUMAR

VIJAY KUMAR (Expert)
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06 April 2020 Dear Mr Nand,
Yes you will be senior citizen for the AY 2021-22(FY 2020-21) since you have attained the age of 60 years during the FY 2020-21.
Regarding slabs pl stick to old rates if your income during the FY2020-21 is below 12.5 lacs to 15 lacs.
Benefits of sticking to old rates are as below.
Enhanced senior citizen limit : 300000 (in new rates it is 2.5 lac only)
utilise 80C :150000, 80D : 50000, 80TTB : 50000, Standard Deduction in case you receive pension, God forbid 80DDB RS 100000/- for specified diseases. (In case you do not have anything apart 80C Rs 9 lacs is the break even point.)

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Nand

Nand (Querist)
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08 April 2020 Thank you so much for your response. I would be retiring from service of the present employer in June - i.e., only 3 months in FY 2020-21. After that I may join a new employer. With the present employer, I can avail 80C benefit of 1.5 lacs ? Kindly clarify. Thanks in advance.

VIJAY KUMAR

VIJAY KUMAR (Expert)
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09 April 2020 Yes, Of course in a entire year (irrespective of number of employers) you can avail Rs 150000/- under 80C maximum from all employers.

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Nand

Nand (Querist)
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21 April 2020 Thanks a lot. One more related query. In case, after joining the new employment, if the total income goes beyond Rs. 15 lacs, what is your advice. Please let me know. Thanks in advance.

VIJAY KUMAR

VIJAY KUMAR (Expert)
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22 April 2020 In that case, pl stick to the old regime. It is advisable overall to stick to the old regime if there is fluctuations expected in income.

Nand

Nand (Querist)
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28 April 2020 Thanks a lot sir..for your response.

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