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Tax benefits for Senior Citizens

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ClearTax helps Individuals prepare and file their Income Tax Returns online in India. www.cleartax.in

The exponential demands for anti-aging treatments would lead us to believe that growing old is going out of style. That may very well be the case for fashionistas, but for the prudent tax payer, being a senior citizen brings a number of tax benefits from the government.

A senior citizen for the purposes of taxation is defined as an individual aged between 60 years up to 80 years at any point during a financial year.

Individuals aged 80 years and above are categorized as super senior citizens. Here are some of the perks of being older and wiser.


1.Lower taxes, higher exemption limits


 The Income Tax department is kinder to older folk with lower tax rates as well as higher income exemption limits for senior and super senior citizens.


The income exemption limit for senior citizens is Rs.2,50,000 whereas the limit for super senior citizens is Rs.5,00,000.


Similarly, the rates of tax are lower for both categories of tax payers.

 


Tax Rates for Senior Citizens

Net Annual Income Income Tax Rates
Up to Rs.2,50,000 Nil
Rs.2,50,000 – Rs.5,00,000
10% of total income that exceeds Rs.2,50,000
Rs.5,00,000 – Rs.10,00,000 
Rs.25,000 + 20% of total income that exceeds Rs.5,00,000
Rs.10,00,000 – Rs.1,00,00,000  Rs.1,25,000 + 30% of total income that exceeds  Rs.10,00,000
Above Rs.1,00,00,000                Rs. 28,25,000 + 30% of total income that exceeds Rs.1,00,00,000


 Tax Rates for Super Senior Citizens 


Net Annual Income Income Tax Rates
Up to Rs.5,00,000 Nil
Rs.5,00,000 – Rs.10,00,000 20% of total income that exceeds  Rs.5,00,000
Rs.10,00,000 – Rs.1,00,00,000 Rs.1,00,000 + 30% of total income that exceeds  Rs.10,00,000
Above Rs.1,00,00,000 Rs.28,00,000 + 30% of total income that exceeds  Rs.1,00,00,000


2.Advance Tax Exemption

 

All assessees are expected to pay their Advance Taxes on a timely manner or pay penalties for late payments / non-payment. However, senior citizens who do not have any business income are exempt from paying any Advance Tax. They only need to pay Self Assessment Tax before filing their tax returns for the financial year.

 

3. Relaxed I-T Scrutiny

 

The I-T department has taken to doing random scrutiny checks on arbitrarily picked tax payers in order to enforce better tax compliance. However, as a special concession, such scrutinies are only carried out on senior citizens against whom the I-T department has credible proof of irregularities in tax payments.

 

4. Higher Tax Deduction on Medical Insurance

Buying a medical insurance policy saves you a maximum of Rs.15,000 per year in the normal course of events. However, if you happen to be a senior citizen, the maximum tax exemption that you can avail increases to Rs.20,000 per annum. This exemption of Rs.20,000 can also be claimed by taxpayers who purchase medical insurance policies for their parents who happen to be senior citizens.

 

5. No TDS on Interest Income

 

TDS is deducted on the interest earned on all Fixed Deposits for all assessees. However, for senior citizens whose total income is below the tax exemption limits in a given financial year, no TDS will be charged on the interest generated from Fixed Deposits. In order to avail this exemption, the senior citizen needs to submit Form 15H at the bank branch where they maintain their FDs.

 

 6. Higher Tax Deduction on Treatment of Specified Diseases (Sec 80DDB)

 

The expenses borne on treating certain specified diseases like Cancer, AIDS, etc can be claimed for tax deductions up to a maximum limit of Rs.40,000. This limit is higher for senior citizens, for whom it is capped at Rs.60,000.

The catch in both cases is that the deduction is applicable only if the expenses borne by the taxpayer should not have been reimbursed by a mediclaim policy. If the expenses are only partially covered by the policy, then the remainder of the expenses can be claimed for tax exemption up to the limits specified above.

 7. No Taxes under Reverse Mortgage Scheme

The government of India launched a Reverse Mortgage Scheme for the benefit of senior citizens in 2007. Under this scheme, any property owned by a senior citizen can be mortgaged in return for a fixed income every month. On the death of the senior citizen, the mortgaged property is sold off. The amounts received by the senior citizens as monthly income is repaid to the lender along with interest, using money from the sale proceeds. The remaining money is paid to the legal heirs of the senior citizens.

The monthly income that is generated by the senior citizens by participating in this scheme is completely exempt from taxes.

 

8. Free Tax Filing on ClearTax!

Yes, the last but definitely not the least important perk of being a senior citizen is that all your tax filing is now free only onClearTax.Get started now!