Retired with income from interest and capital gains? Learn how senior citizens can legally reduce taxes under India’s new regime in 2025. Simple, clear guide inside.
“I’m a retired senior citizen. I earn Rs2 lakh from interest, Rs1.5 lakh from short-term capital gains, and Rs 2.2 lakh from long-term capital gains. How do I calculate my tax under the new regime?”
If that sounds like your situation—first, take a deep breath. You’re not alone. With India’s updated tax rules for 2025, thousands of retirees are in the same boat—earning passive income but confused about how to compute their taxes correctly.
Let me break this down for you in plain English, without the jargon—and with some solid, money-saving tips you can actually use.
🧮 Let’s Do the Math: What Is Taxable?
Your total income:
- Rs 2,00,000 – Bank Interest (Fully taxable)
- Rs 1,50,000 – Short-Term Capital Gains (STCG)
- Rs 2,20,000 – Long-Term Capital Gains (LTCG)
So your gross income is Rs5.7 lakh.
Section 112A & 111A – The Basics
- LTCG (on listed equity shares, equity mutual funds, REITs, InvITs with STT paid) gets a Rs 1.25 lakh exemption.
- STCG under Section 111A (also equity-based) is taxed at 15% (or 20% post July 23, 2024).
- LTCG under Section 112A is taxed at 10% (or 12.5% post July 23, 2024).
What Can Be Exempted?
- Interest income is well within your Rs3 lakh basic exemption limit for senior citizens.
- That unused slab (Rs3 lakh – Rs2 lakh = Rs1 lakh) can be adjusted against LTCG.
Now let’s look at the numbers post adjustment:
- LTCG: Rs2.2 lakh
- Less: Rs1.25 lakh exemption
- Less: Rs 1 lakh adjusted from slab
- Taxable LTCG Rs = 0 (yep, zero)
- STCG: ₹1.5 lakh (fully taxable)
But What About Section 87A Rebate?
Here’s where it gets tricky—and interesting.
Section 87A gives you a ₹25,000 rebate if total income is under ₹7 lakh. But—and it’s a big but—you can’t use that rebate against LTCG tax under Section 112A.
And while the law is silent about STCG, the Income Tax Department’s system won’t let you apply that rebate against it either. If you try to claim it, be prepared for a possible legal battle.
So you have two options:
🅰️ Claim Rebate (Technically Legal, But Risky)
- LTCG = Fully adjusted (no tax)
- STCG = ₹1.5 lakh
- ₹60k taxable after slab
- Apply ₹25,000 rebate → Zero tax
- Risk: CPC portal may not accept, possible scrutiny.
🅱️ Play It Safe, Don’t Claim Rebate
- Tax on ₹60k STCG at 15% = ₹9,000
- Tax on ₹95k LTCG at 10% = ₹9,500
- Total = ₹18,500 (if assets sold before 23 July 2024)
After 23 July? Rates go up to 20% and 12.5% = ₹20,375 total tax.
Which ITR Form to File?
Use ITR-2 if:
- You have capital gains
- Income above ₹2.5 lakh
- No business income
✅ File by: 15 September 2025
Final Thoughts: Smart Tax Tips for Senior Citizens
- Use your basic slab exemption wisely against LTCG.
- File on time—delays = penalties.
- Keep STT proofs and sale-purchase documents.
- If selling post 23 July 2024, factor in higher tax rates in your gains.
In Simple Words
You can legally pay zero or very minimal tax as a retired senior citizen if you use your slab, exemptions, and plan your capital gains wisely.
Don’t forget—capital gains can be a blessing if managed smartly. And the new tax regime has its quirks, but also its benefits. You just need to know where to look.
