Articles Discusses Income Tax Benefits Available to Senior Citizens in India. A person becomes senior citizen under Income Tax Act in any year after attaining the age of 60 even for one day. Once he attains 60 years, his status as senior citizen in that financial year, gives him some relief. There are not many income tax exemptions available for senior citizens. These are listed below:
1. Higher Exemption Limit for Senior Citizens
From F.Y. 2011-12 Qualifying age for Senior Citizens has been reduced from 65 years to 60 years and from A.Y. 2015-16 exemption limit for Senior Citizens has been enhanced from Rs. 2,50,000 to Rs. 3,00,000. A new category of Very Senior Citizens, 80 years and above, has been created who will be eligible for a higher exemption limit of Rs. 5,00,000. Senior citizen above the age of 80 years are entitled to higher exemption Limit of Rs. 5,00,000 from A.Y. 2012-13.
Senior citizens and a very senior citizen are granted a higher exemption limit as compared to normal tax payers. Exemption limit is the quantum of income up to which a person is not liable to pay tax.
The exemption limit granted to senior citizen and very senior citizen for the financial year 2020-21 is as follows :
|Senior citizen||Very senior citizen|
|A senior citizen is granted a higher exemption limit compared to non-senior citizens. The exemption limit for the financial year 2020-21 available to a resident senior citizen is Rs. 3,00,000. The exemption limit for non-senior citizen is Rs. 2,50,000. Thus, it can be observed that an additional benefit of Rs. 50,000 in the form of higher exemption limit is available to a resident senior citizen as compared to normal tax payers.||A very senior citizen is granted a higher exemption limit compared to others. The exemption limit for the financial year 2020-21 available to a resident very senior citizen is Rs. 5,00,000. The exemption limit for non-senior citizen is Rs. 2,50,000. Thus, it can be observed that an additional benefit of Rs. 2,50,000 in the form of higher exemption limit is available to a resident very senior citizen as compared to normal tax payers.|
2. Reverse mortgage for senior citizens
Reverse mortgage’ – a concept introduced by Finance 2007 -provides that a senior citizen will be able to avail of monthly income streams by mortgaging a house owned by him. For more details read the following article :- Reverse mortgage created under a scheme made and notified by the Central Government shall not be regarded as a transfer U/s. 2(47)
3. Tax benefits on medical insurance hiked for Senior Citizens
a. A senior citizen can avail of higher of higher deduction of Rs 50,000 u/s Section 80D in respect of medical insurance premium for Financial Year 2019-20.
b. Further Senior Citizen can claim deduction of Rs 50,000 in aggregate in respect of medical expenditure incurred on the health of assessee, himself, his/her spouse or dependent children or parents. [This deduction is available if amount is paid for benefit of a senior citizen and no amount has been paid to effect or to keep in force an insurance on the health of such person.]
Aggregate deduction on a. or b. above cannot exceed Rs. 50000.
4. Deduction under Section 80TTB
Section 80TTB of the Income Tax law gives provisions relating to tax benefits available on account of interest income from deposits with banks or post office or co-operative banks of an amount upto Rs. 50,000 earned by the senior citizen (i.e., an individual of the age of 60 years or above). Interest earned on saving deposits and fixed deposit, both shall be eligible for deduction under this provision.
5. Relief from TDS under Section 194A
Section 194A of the Income Tax law gives corresponding provisions that no tax shall be deducted at source from payment of interest by bank or post-office or co-operative bank to a senior citizen up to Rs. 50,000. Therefor limit is to be computed for every bank individually.
6. Higher Deduction u/s 80DDB for Senior Citizens and Super Senior Citizens
Section 80DDB provides deduction to an assessee in case of expense on medical treatment of specified ailments. Generally this deduction is available upto Rs 40,000. However , if the patient is a senior citizen, then deduction of Rs 1,00,000 is allowable. Section 80DDB– Limit raised & waived condition of certificate
7. Senior Citizens not having Business Income Exempt From Advance tax payment :–
As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of “advance tax”.
However, section 207 gives relief from payment of advance tax to a resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year). As per section 207 From Financial year 2012-13 resident senior citizen, not having any income chargeable under the head “Profits and gains of business or profession”, shall not be liable to pay advance tax and such senior citizen shall be allowed to discharge his tax liability (other than TDS) by payment of self assessment tax.
8. Senior citizens receive a higher interest (up to 50 bps) on a 5-year fixed deposit, which is eligible for deduction from the total income under Section 80C.
9. Senior citizens can claim exemption on the tax deducted at source (TDS) on interest income earned on deposits. It can be done by submitting Form 15H under Section 197 of the IT Act.
10. Exemption from e-filing of income tax return to very senior citizen
Income-tax Act, 1961 provides no exemption to senior citizen or very senior citizen from filing of return of income. However, to provide relief to the senior citizens (whose age is 75 years or more) and to reduce the compliance burden on them, the Finance Act, 2021, has inserted a new Section 194P.
This provision requires a banking company to deduct tax under this provision if deductee is maintaining an account with it in which he is receiving his pension income. The tax is required to be deducted under this new provision if the recipient is a resident individual whose age is 75 years or more at any time during the year and the following conditions are fulfilled:
a) Total Income of the deductee consists only income in the nature of pension and interest received or receivable from any account maintained with deductor (such bank); and
b) Deductee has furnished a declaration to deductor containing prescribed particulars.
If the above conditions are satisfied, the deductor shall compute the income of deductee after giving effect to the deduction allowable under Chapter VI-A and rebate under Section 87A. Tax on such income is required to be deducted on the basis of rates in force.
If tax is deducted from the income of such senior-citizen, he shall not be liable to furnish the return of income for the previous year in which tax has been deducted.
Thing to Note
At what age a person will qualify as a senior citizen and very senior citizen under the Income-tax Law?
Before understanding the age criteria, it is very important to know that the tax benefits offered under the Income-tax Law to a senior citizen/very senior citizen are available only to resident senior citizen and resident very senior citizens. In other words, these benefits are not available to a non-resident even though he may be of higher age. The age and other criteria to qualify as a senior citizen and very senior citizen under the Income-tax Law are as follows :
|Criteria for senior citizen||Criteria for very senior citizen|
|Must be of the age of 60 years or above but less than 80 year at any time during the respective year.||Must be of the age of 80 years or above at any time during the respective year.|
|Must be resident||Must be resident|