Tax Planning and Tax benefits for senior citizens and Super senior citizens

The Income Tax Act provides many tax benefits for senior citizens in India, over and above the tax relief measures offered to people below 60 years of age. If you’re over the age of 60, or if you know someone who is, being aware of the additional tax benefits provided by the Income Tax Act can help with tax planning for senior citizens. So, here’s a quick look at the many senior citizen income tax benefits offered by the Income Tax Act.

1. Higher basic exemption limit

   The tax benefits for senior citizens start right from the Income Tax slab rates. Unlike regular assessees, seniors enjoy a higher basic exemption limit. This essentially means that people over the age of 60 are not liable to pay tax up to a certain specified limit.
   
   A senior citizen over the age of 60 (but below the age of 80), who is a resident of India, is not required to pay tax on income up to Rs. 3,00,000. Similarly, a super senior citizen, who is over the age of 80 and a resident of India, is not liable to pay tax on income up to Rs. 5,00,000.
   
   Compared to a regular individual, a senior citizen and a super senior citizen enjoy an additional tax exemption benefit of Rs. 50,000 and Rs. 2,50,000 respectively. 

2. Higher deduction under section 80D

   Section 80D deals with deduction on premium paid for health or medical insurance. This section provides senior citizens with a higher-than-normal limit of deduction. Senior citizens are eligible to claim up to Rs. 50,000 of premium as a deduction under this section, as opposed to just Rs. 25,000 for regular taxpayers.

3. Deduction of interest on savings and fixed deposits

   The Government of India, in its 2018 Budget, introduced section 80TTB to provide relief to senior citizen taxpayers. This section provides an additional deduction of up to Rs. 50,000 on certain specified sources of income. The list of incomes that qualify for deduction under section 80TTB is given below.
   
   • Interest on fixed bank deposits
   • Interest on savings bank deposits
   • Interest on post office deposits
   • Interest income earned from deposits held with a co-operative society that is engaged in the business of banking
   Section 80TTB gives senior citizens a considerable advantage because they enjoy a much greater quantum of deduction on interest income than non-senior citizen taxpayers, who can only claim up to Rs. 10,000 (under section 80TTA).  Assessees over the age of 60 can take advantage of the provisions of this section as part of tax planning for senior citizens.

4. Exemption of reverse mortgage income

   This is another one of the many senior citizen income tax benefits introduced by the government. Reverse mortgage is a unique scheme that allows senior citizens to mortgage their property with a financial institution for either periodic payments or a lump-sum payout. The Income Tax Act gives complete exemption to senior citizens who have availed of any reverse mortgage scheme. According to Section 10(43), any amount received by a senior citizen as part of a reverse mortgage scheme, whether as a lump-sum payment or as installments, is exempt from tax.  

5. Higher deduction limit under section 80DDB

   A senior citizen undergoing any medical treatment for a specified disease can make use of the deductions under section 80DDB to reduce the impact of tax. According to the provisions of this section, the maximum amount of deduction that can be claimed by senior citizens and super senior citizens is Rs. 100,000.
   However, the following conditions have to be satisfied for claiming tax benefits under this section.
   
   • The taxpayer must be a resident of India.
   • A prescription for medical treatment from the concerned specialist doctor has to be obtained.
   • The cost of treatment should not have been reimbursed under an insurance.
   
   The list of specified diseases which are covered under section 80DDB are:
   1. Hematological disorders, namely Thalassaemia and Hemophilia
   2. Cancer that is adjudged as being malignant.
   3. Acquired Immunodeficiency Syndrome (AIDS)
   4. Chronic renal failure
   5. Neurological diseases (with a certified disability level of 40% and above) such as
   a.     Motor Neuron Disease
   b.     Ataxia
   c.     Chorea
   d.     Aphasia
   e.     Dementia
   f.      Parkinson’s Disease
   g.     Hemiballismus
   h.     Dystonia Musculorum Deformans

6. Exemption from payment of advance tax

   Any individual whose tax liability is estimated to exceed Rs. 10,000 in a financial year is mandated by the Income Tax Act to pay advance tax. However, Section 207 of the act provides tax benefits for senior citizens with respect to payment of advance tax. According to the provisions of the section, resident senior citizens are not liable to pay tax in advance as long as they do not have any income chargeable under the head “profits and gains of business or profession.”

Conclusion:

In addition to these senior citizen income tax benefits, you can also avail the other regular deductions and exemptions available to all individual assesses. For instance, you could make use of the provisions of section 80C to claim up to Rs. 150,000 as a deduction from your total income. To claim this deduction, you could invest in tax-saving fixed deposits or ULIPs. Alternatively, if you’d invested in a life insurance policy in your younger years, you can continue to claim the premium on the insurance plan as part of the deduction under this section. You can learn more about Term Insurance by browsing the website for the various Term Plans offered by PNB MetLife.

The income tax is levied on all earning individuals who fall under a taxable income bracket. The income tax is paid to the Government of India and is charged annually. However, there are several tax deductions and exemptions that you can claim to lower your tax liability. The Income Tax Calculator helps you ascertain your tax output for a financial year based on your taxable income. This can help you plan well and save tax using the tax-saving deductions and exemptions, if possible.