In order to provide tax benefits for old age people, the government has given a number of tax benefits to this category under the Income Tax Act.
Income Tax saving options for senior citizens: In India, a senior citizen is an individual aged 60 years or above, while a person aged 80 years or above is considered as a super senior citizen as per norms. In order to help elderly citizens, the government has given a number of income tax benefits to this category under the Income Tax Act. Senior citizens and super senior citizens can save money by knowing about these benefits.
The current income tax rates for senior citizens in India are:
– For income up to Rs 3 lakh, there is no tax for senior citizens (aged 60 years or above), with effective reduction of Rs 5,000.
– For income up to Rs 5 lakh, there is no tax for super senior citizens (aged 80 years or above), with effective reduction of Rs 30,000.
Here are the key tax benefits provided to individuals aged 60 years or above:
1. Interest exemption under Section 80TTB for senior citizens:
In the Union Budget of 2018-19, the interest exemption limit on deposits was increased from Rs 10,000 to Rs 50,000 per annum. Earlier, senior citizens were liable for deduction of TDS on interest income. The TDS could be avoided by submitting Form 15-H to the bank in advance. However, if someone forgot to submit Form 15-H, the TDS was deducted and the person was required to file returns to claim a tax refund.
As it was a difficult process, the government simplified this aspect by announcing no TDS for senior citizens and no requirement of Form 15-H in the last budget. However, in case the interest income exceeds Rs 50,000 annually, the individual will be required to pay the tax.
2. Additional tax deduction on health insurance premium for senior citizens
The premiums paid on recognized health insurance policies for self, family, and parents are eligible for deduction under Section 80D. This deduction was Rs 25,000 for regular taxpayers and Rs 30,000 for senior citizens till Budget 2018. In the last year’s Budget, however, the government increased the limit for senior citizens to Rs 50,000 per annum.
Also, now the revised limit under Section 80DDB stands has enhanced to Rs1,00,000 per year for all citizens above 60 years of age for medical treatment expenses for specified diseases. Prior to Union Budget 2018, an exemption of Rs 60,000 for senior citizens (above 60 years) and Rs 80,000 for super senior citizens (above 80 years) was available.
3. Standard Deduction benefit and no advance tax liability on senior citizens
Earlier standard deduction used to be available only to the working class. But Budget 2018 provided for a flat standard deduction of Rs 40,000 to every taxpayer, including senior citizens in the country. Senior citizens earning post-retirement pension are now also eligible for standard deduction. Also, unless the senior citizen is in business, they remain exempt from advance tax.
4. Special benefit under reverse mortgage scheme for senior citizens
The reverse mortgage is a scheme for senior citizens, which allows to monetise property value and get EMIs in return. The amount is paid regularly to the senior citizens under this scheme and is entirely exempt from tax.