What are the income tax benefits to senior citizens?

The Income Tax Act, 1961 provides certain tax benefits to senior citizens and super senior citizens. The maximum amount of income up to which the income tax department does not charge income tax is Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens.

However, such benefits are not available under the new tax regime. As per the new tax regime, the basic exemption limit is Rs 2.5 lakh for all individuals, including senior and super senior citizens. As per the income tax law, senior citizens are those individuals whose age is more than 60 years but less than 80 years anytime during the relevant financial year. Super senior citizens are those individuals whose age is more than 80 years more during the financial year. 

Apart from the basic exemption limit, the senior and super senior citizens also enjoy below tax benefits:

Non-filing of income tax return: The Finance Act, 2021, inserted a new provision that provides a conditional relaxation to certain senior citizens from filing the income tax return. The senior citizens who qualify for non-filing of the income tax return should fulfil the below eligibility criteria: 

• Who is of 75 years age or above,
• A resident of India,
• Should receive only below two incomes in the Financial Year:
  • Pension
  • Interest income (from the same bank from where he receives pension)
• Senior citizens should furnish a declaration to the bank with prescribed particulars

The bank will calculate the income tax based on the declaration provided by the senior citizen after considering the deductions under Section 80C to 80U and rebate under Section 87A. The tax is required to be computed based on the normal tax slab rates applicable for that financial year. If the bank deducts such tax, the senior citizen is not required to file his income tax return.

e-Filing not mandatory: Any super senior citizen filing income tax return in Form ITR-1 or ITR-4 may file the income tax return in paper form. They can file their return either electronically or by paper mode.

Deduction of interest from savings and fixed deposits: The senior citizen and super senior citizens earning interest income from savings and fixed deposits from banks, post-office or co-operative banks can take a deduction up to Rs 50,000 on such income. 

No TDS on interest income: As per the Income Tax Act, no tax shall be deducted at source (TDS) by the banks if the interest income of senior or super senior citizens is up to Rs 50,000. The limit of Rs 50,000 is for interest income from each bank individually.

No advance tax liability: The taxpayer has to pay advance tax if the tax liability is above Rs 10,000 for the financial year. However, senior citizens above 60 years of age and not having any income from business or profession are not required to pay tax in advance (advance tax). 

Additional deduction under Section 80D: A senior citizen can deduct under Section 80D for health insurance premium paid for self. The limit to claim under Section 80D is Rs 50,000. Also, if he pays a health insurance premium for senior citizen parents, he can take a separate deduction of up to Rs 50,000 under Section 80D.

A senior citizen can also claim a deduction for expenses incurred towards medical treatment up to Rs 50,000. However, he should not have any health insurance premium existing in his name.

Additionally, they can claim a deduction of up to Rs 1 lakh for treating diseases specified under Section 80DDB of the Act.

The standard deduction for pensioners: The senior citizens who receive pension can claim a standard deduction of up to Rs 50,000 from their pension income.

Senior citizens can enjoy these special benefits provided by the income tax law. They should not forget to use these benefits while filing their income tax return.

For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in