Navigating complex income tax rules can be challenging, especially for individuals in the later stages of life. To ease this burden, the government offers several tax benefits specifically for senior citizens. Understanding and leveraging these advantages can significantly contribute to a secure and comfortable retirement. Let’s see how these tax benefits can help ensure a peaceful and comfortable retirement.
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Who is Senior Citizen?
For income tax purposes, Indian resident individuals are classified as “Senior Citizens” once they reach the age of 60 years.
Additionally, Indian resident individuals who reach the age of 80 years are classified as “Super Senior Citizens” and are eligible for further tax benefits.
Note: If a person’s birthday falls on April 1st, they are considered to reach the age one day earlier, on March 31st of the same year (as clarified by Circular No. 28/2016 by CBDT).
For example, if Person X is born on April 1st, 1964, and celebrates their 60th birthday on April 1st, 2024, they will be considered a Senior Citizen for FY 2023-24 (AY 2024-25).
Tax benefits available
Following are the benefits available for Senior citizens and Super senior citizens:
- Lower Income Tax Rates under Old Regime:
| Income Slab |
Individuals (Age < 60) | Resident Senior Citizens (60-80 years) | Resident Super Senior Citizens (80 and above years) |
| Up to ₹2,50,000 | Nil | Nil | Nil |
| ₹2,50,001 to ₹3,00,000 | 5% | Nil | Nil |
| ₹3,00,001 to ₹5,00,000 | 5% | 5% | Nil |
| ₹5,00,001 to ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
- Deduction of Interest Income:
Section 80TTB allows senior citizens (aged 60 or above) to claim a deduction of up to ₹50,000 on interest income from deposits with banks, co-operative societies, or post offices. If the total interest income is ₹50,000 or less, the entire amount can be deducted. This deduction is not available for interest earned on deposits held by or on behalf of firms, associations, or bodies of individuals.
- Increased deduction:
- Section 80DDB allows a deduction for medical treatment of specified diseases. For general taxpayers, the deduction is up to ₹40,000 or the actual amount paid, whichever is less. However, for senior citizens (aged 60 or above), the deduction limit increases to ₹1,00,000. The deduction is available for the person filing return, their dependents, or HUF members, provided a prescription from a specialist is obtained.
- Section 80D provides a deduction for health insurance premiums and medical expenses. For individuals below 60 years, the deduction is up to ₹25,000 for premiums paid for themselves, their family, and dependent children. For senior citizens (aged 60 or above), the limit increases to ₹50,000. If no insurance is taken, medical expenses for senior citizens are deductible up to ₹50,000. Preventive health check-up expenses can be deducted up to ₹5,000 for all. The deduction is available for the person filing return, their dependents, or HUF members.
- TDS relief:
Section 194A mandates TDS on interest (other than on securities) paid to residents. TDS applies if the interest exceeds ₹40,000 in cases involving banks, co-operative societies, or post offices. For senior citizens, this threshold is higher, set at ₹50,000. The resident senior citizens having no taxable income can also submit Form 15H for not deducting TDS on interest income.
- Exemption from filling returns to certain senior citizens:
Section 194P provides that for a “specified resident senior citizen” (aged 75 or above, receiving only pension and interest income from the same bank, and a declaration is submitted to the specified bank), the specified bank will compute and deduct income tax after considering deductions under Chapter VI-A and rebates under Section 87A. If tax is deducted, the senior citizen is exempt from filing an income tax return under Section 139. The “specified bank” is designated by the Central Government.
- Relief from Payment of Advance Tax for Senior Citizens:
Section 207 provides relief from paying Advance Tax for Resident Senior Citizens (individuals aged 60 years or more) who have no income from business or profession. This exempts them from paying advance tax even if their estimated tax liability is ₹10,000 or more during the year.
- Additional option of tax saving investment:
Section 80C provides deductions of up to ₹1.5 lakh annually for various investments like life insurance, provident funds, and many more. While the core provisions remain the same, senior citizens can invest in the Senior Citizens Savings Scheme (SCSS) under section 80C, offering them a safe and specific investment option for tax savings. This scheme is aimed exclusively at senior citizens, providing them a secure way to earn and save on taxes within the standard ₹1.5 lakh deduction limit.
- Option of Paper filing of Income Tax Return:
Rule 12 of Income Tax Rules 1962 specifies that Super Senior Citizens (aged 80 years or more) have the option to submit their ITR using Form 1 or 4 in offline / paper mode.
Conclusion:
The government extends a range of tax benefits to individuals aged 60 and above, granting relief through specific provisions of the Income Tax Act. To ensure you fully utilize these benefits, consulting a qualified financial advisor is highly recommended.
A financial advisor can help you maximize the benefits available while ensuring compliance with tax laws by accurately reporting income and making appropriate deductions. This helps senior citizens avoid notices and penalties due to non-compliance, while also simplifying the complex filing process.
To optimize your tax planning, download the 1 Finance app and book a consultation with a qualified financial advisor for a seamless, hassle-free tax planning experience.
