The Income Tax Act offers certain special benefits to senior citizens and super/very senior citizens. A senior citizen is one who is the age of 60 years or above but less than 80 years old at any time during the respective year. A super/very senior citizen is one who must be the age of 80 years or above at any time during the respective year. In order to protect the culture and moral values, the government of India offers several income taxes benefits to senior citizens.
The additional benefits available to Senior/Super Senior citizens are listed below:
- Paper filing of Income Tax Return-Super Senior Citizens can submit their ITR using Form 1 or 4 in offline/paper mode. They are given exemption from e-filing of Income Tax Return. However, they can also use the e-filing option.
- Section 207 of the Income Tax Act provides relief from payment of Advance Tax to a Resident Senior Citizen. If he/she does not earn income from Business or Profession, there is no need to pay Advance Tax. Such a liability arises when the estimated tax liability for the year is Rs. 10,000 or more under section 208 in case of every other taxpayer.
- Under section 115BAC they can opt for the Existing Tax Regime or the New Tax Regime with lower rate of taxation.
- The interest earned from deposits with banks, post office or co-operative banks are eligible for tax benefits under section 80TTB. The amount of deduction is allowed for a maximum of interest income up to Rs.50,000. This includes interest on saving deposits and fixed deposits. There is no TDS on all such interest payment, and it is computed for every bank individually.
- Senior citizens are allowed to get a higher deduction of up to Rs.50,000 for payment of premium towards medical insurance policy under section 80D. The medical expenditure incurred on the health of the assessee himself, his/her spouse or dependent children or parents are thus given due consideration. Senior citizens need more money to take care of their health, hence this benefit.
- Also, the maximum deduction amount in case of a senior citizen is Rs. 1 lakh under section 80DDB incurred by an individual on himself or a dependent towards the treatment of specific disease. The deduction available to individuals other than senior citizens is limited up to Rs. 40,000. For senior citizens the limit is raised and there is a waived condition of certificate. The specific diseases include AIDS, Neurological diseases, Malignant Cancer, Hematological disorders and Chronic renal failure.
- The exemption limit for the assessment year 2021-22 available to a resident senior citizen is Rs.3,00,000 and a super senior is eligible for a higher exemption limit of Rs. 5,00,000.
- A new section 194P has been inserted to provide relief to the senior citizens whose age is 75 years or more to reduce the compliance burden. As per this provision a banking company shall deduct tax if assessee is maintaining an account with it in which he is receiving his pension income. The tax is thus deducted 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.
- Total income of the assessee consists only of income from pension and interest received or relievable from any account maintained with such bank.
- He/she has furnished a declaration to the bank containing prescribed particulars.
- When these conditions get fulfilled, the income shall be computed after giving effect to the deduction allowable under Chapter VI-A and rebate under section 87A. Tax gets deducted based on the applicable tax rates. Once tax gets deducted from the income of such senior citizen, he/she shall not be liable to furnish the return of income for the previous year in which tax has been deducted.
- Reverse mortage, a concept introduced by Finance Act 2007, allows a senior citizen a monthly income stream by mortgaging a house owned by him. This benefit shall be available till they die after which the house is sold. The regular payments that are made to the senior citizen during the lifetime are entirely tax free.
What are the other ways to save tax?
Choose some annuity plan as a part of retirement savings. Start making a lump sum investment and you can get an immediate or deferred annuity as per the chosen plan. An annuity plan can be bought out of National Pension Scheme proceeds. Invest in other available options like life insurance policies to get benefits under section 80C. The premiums paid on such polies are tax exempt up to Rs. 1.5 lakh. The death benefit received by the nominee is completely tax free.
Consult a professional financial advisor or a tax expert to understand the latest applicable provisions and get the maximum possible deductions allowed by the Income Tax Act and other prevalent laws.
Bhoi Smrutirekha Dharanidhar