Income Tax Benefits For Senior Citizens You Must Know

July 30, 2019

income-tax-benefits-for-senior-citizens-you-must-know

The senior citizens in India are eligible for certain income tax benefits as guaranteed by the Indian Income Tax Act. This write up enlists the special tax deductions applicable to them.

The Indian Income Tax Act provides certain tax benefits for the senior citizens to make their life simpler. In other words, the Government of India, for the benefit of the senior citizens has created a separate income tax slab for senior citizens. This tax benefit is extended to all individuals who are 60 years or older; and for those who are 80 years or older, get the benefits as applicable for super senior citizens. Let us look at the various tax benefits.

Tax slab rates

The income tax slab rates for the senior citizens are different from the general (non-senior citizens) public. The table below explains the tax rates for individual’s income up to Rs 5 lakh.

Tax rateNon-senior citizensSenior Citizens (Age: 60 years and above)Super-Senior Citizens (Age: 80 years and above)
Tax free Income up to Rs 2.5 lakh Income up to Rs 3 lakh Income up to Rs 5 lakh
5% tax Income between Rs 2.5 lakh and Rs 5 lakh Income between Rs 3 lakh and Rs 5 lakh NA

However, after the interim budget 2019, individual taxpayers having annual income up to Rs 5 lakh will get 100% tax rebate under Section 87A. The income tax slabs remain unchanged for the Financial Year (FY) 2020.

Interest Income Exemption under Section 80TTB

During the budget announcement in 2018, the Finance Minister of India had announced the introduction of a new Section 80TTB for the senior citizens to be effective from the FY2019. Under the section, the income earned through interest on all kinds of deposits up to Rs 50,000 are exempted from tax and the amount earned over Rs 50,000 are taxable as per the applicable senior citizen tax slab. This section continues to be effective in the current FY2020.

Deductions for payment of medical insurance premium under Section 80D

For the non-senior citizens, under Section 80D, the deduction allowed for the payment of medical insurance premium is Rs 25,000 and for senior citizens the deduction is extended up to Rs 50,000. The deduction for the senior citizens was earlier Rs 30,000 the new deduction came into effect from April 1, 2018.

Special tax benefit under the reverse mortgage scheme

The reverse mortgage scheme is a special scheme for the senior citizens wherein they can monetise their property and get Equated Monthly Instalments (EMIs) in return, even as they retain the ownership of the property. It is the exact opposite of the Home Loan scheme, and the amount paid to them under this scheme is exempted from tax.

Exemption from advance tax payment

As per Section 208, every individual whose estimated tax liability exceeds Rs 10,000 is liable to pay advance tax by the due dates. However, Section 207 exempts a resident senior citizen (age 60 years or above) from paying advance taxes if the individual does not have any business or profession. A senior citizen may receive income from various sources such as rental income, interests from bank deposits or pension, or dividends. Unless the income falls under the head of “income from business or profession” the individual is not liable for any advance tax.

All the above tax benefits available for the senior citizens can help them live a financially independent post-retirement life.

 

 

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