Tax benefits available for senior citizens

The tax exemption limit given to senior citizens is 3 lakh which is higher by `50k when compared to other individuals. This limit is extended to 5 lakh for those classified under very senior citizen category, aged 80 and above.

Sensing the need for financial freedom in their sunset years, the Indian government has provided certain tax advantages for the senior citizens. The younger children could also know these benefits to explore and utilize these provisions to their parents’ benefit. Any individual, whose age is 60 years and above, is considered as senior citizen. The govt in recent years also made an additional classification within this group with age of those at 80 and above to be treated as very senior citizens. Those who fall into this category enjoy higher limits in the provisions for tax savings. However, all the tax benefits are restricted to the resident individuals only.

The first and foremost is the tax exemption limit given to the senior citizens is Rs 3 lakh which is higher by Rs 50k when compared to the rest of the citizens. This limit is extended to Rs 5 Lakh for those classified under very senior citizen category. So, these individuals needn’t pay any tax within these limits of their earning in each financial year. The govt has also relaxed in the payment of any advance tax, if they have any business income. Instead, those who have this income need to pay a self-assessment tax on the overall income at the end of the financial year.

Considering the raising health costs and the frequency of these costs, the govt has a higher limit under Sec 80D towards the payment of medical insurance premium. The premium that could be deducted from the income is Rs 30k in an assessment year. In case of a senior citizen, paying for their parents who happen to be senior citizens, the deduction allowed is up to Rs 60K for every year.

If a senior citizen suffers from any critical illness, could claim a tax deduction from their income up to Rs 60k under the Sec 80DDB. This is extended to Rs 80k in case of a very senior citizen. This provision is applicable for diseases in the approved list and the individual has to furnish a certificate from the hospital or a recognized medical practitioner to be eligible for this deduction.

Reverse mortgage loans help senior citizens to receive monthly income by mortgaging their house. The govt has provisioned for the senior citizens to avail tax free income on the money received from a reverse mortgaged home. It however needs to self-owned and self-occupied.

The govt also relaxed certain other procedural guidelines in case of the senior and very senior citizens. The routine income tax (IT) scrutiny by the IT department is not done for these individuals unless the department has some real credible information to initiate scrutiny proceedings. This is to avoid any mental stress that could cause during the scrutiny. If the overall income is below the taxable limit, then the senior citizen could claim non-deduction of tax deduction at source (TDS) on the various investments which accrue interest by filling and submitting form 15H. However, one has to submit this form every year for availing this benefit.
In further relaxation of rules and regulations, e-filing of tax returns is not made mandatory for very senior tax payers. Sensing their discomfort to the technological changes, they are allowed to even file the returns in the physical/paper format.

(The author is a practising financial planner and could be reached at [email protected])