Tax Benefits For Senior Citizens: Eligibility, List Of Benefits And More
Senior citizens have multiple sources of revenue. It includes pension, reverse mortgage, fixed deposit, and others. So, the government, to maintain parity between senior citizens and younger adults, applies taxes on them.
However, to give them some relief, the government also offer benefits like tax exemptions to senior citizen in India. Learn about who falls under the senior citizen category, the tax benefits, and other details here.
Who Qualifies as a Senior Citizen?
For tax calculation purposes, an individual is said to be a senior citizen if their age falls within the bracket of 60 years to 80 years. In addition, if an individual has an age exceeding 80 years, they are considered a super senior citizen.
What Are the Different Sources of Income of a Senior Citizen?
The following are the different sources of income of senior and super senior citizens:
- Interest earned from fixed deposit or savings account
- Pension
- Income from capital gains
- Revenue from renting out a property or rental income
- Reverse mortgage scheme
- Senior Citizen Savings Scheme (SCSS)
- Interest from post office saving schemes, etc.
Reasons Why Senior Citizens Enjoy Special Tax Benefits
The purpose of the government offering special benefits like tax exemption for senior citizens in AY 2022-2023 is to reduce financial pressure on them at this stage of life. So, after serving different generations, they can live the rest of their lives stress-free.
Also Read: What Are Pension Funds? Types Of Pension Funds
What Are Some Income Tax Benefits That Senior Citizens Enjoy?
Let’s take a look at some of the tax benefits offered to senior citizens:
- Income tax slab
One of the main tax benefits is that the taxable income slab for these citizens starts at a total income of Rs. 3 lakh, and for super seniors, it starts at Rs. 5 lakh. However, it starts at Rs 2.5 lakh for younger adults.
- Advance tax
There is also an advance tax exemption for senior citizens under which they do not have to pay advance tax against rent, salary, and interest income. In contrast, younger individuals have to pay an advance tax if the income tax is more than Rs. 10,000 for the financial year as mentioned in Section 208 of the Income Tax Act.
- Standard deduction
The Government of India provides a standard deduction of Rs. 50,000 on the pension of a retired senior citizen employee of the Central/State Government.
- Deduction on health insurance premium
Another tax benefit provided to these citizens includes a deduction of Rs. 50,000 under Section 80D if they pay a health insurance policy premium. However, those individuals whose age is below 60 years will get a deduction of only up to Rs. 25,000.
- Tax deduction on interest income
The Indian government provides a tax deduction of up to Rs. 50,000 to senior citizens under Section 80TTB. It is available on their interest income from post office savings accounts, bank savings accounts, fixed deposits, and recurring deposits. However, those below the age of 60 get a deduction of only up to Rs. 10,000 on interest earned from savings accounts under section 80TTA.
- Reverse mortgage scheme amount exemption
If a senior citizen earns through a reverse mortgage scheme, they get an income tax exemption for senior citizens in FY 2021-22. Under this scheme, they get an interest amount from the financial institution. However, the ownership remains with them till they are alive. Upon their death, the financial institution sells their house to repay the loan, and if there’s any balance left from the sale value, it gets passed on to their legal heir.
- Section 80DDB deduction for treatment of specific ailments
Section 80DDB of the Income Tax Act provides deduction to taxpayers if they incur expenses on medical treatment of specific ailments mentioned by them. For a senior citizen, the deduction amount extends up to Rs. 60,000, and for super senior citizens, it is Rs. 80,000. However, from FY 2018-19, this amount has been increased to Rs. 1 lakh for senior and super senior citizens.
How Is Tax Calculated for Senior Citizens in FY 2021-22?
Senior citizens must calculate their income tax for FY 2021-22 by incorporating income from house rent allowance, basic salary, fixed allowance and others. Next, take all the deductions and tax exemptions for senior citizens made available by the government. Then use a calculator for determining your taxable income.
During the Union Budget 2020, the Government of India introduced new tax regimes for assessment. Furthermore, they gave a choice to taxpayers that they can either choose to calculate tax considering the existing tax structure or follow a new one applicable from FY 2020-21.
Find the applicable tax slab for senior and super senior citizens below.
Income Tax Slab Applicable for Senior Citizens
To accurately calculate the taxable income of senior and super senior citizens, refer to the below table:
Income tax slab for citizens aged between 60 to 80 years (FY 2021-22)
| Income Tax Slab | Tax Rate | Health and Education Cess |
| Up to Rs. 3 lakh | No tax | NA |
| Rs. 3-5 lakh | 5% | 4% on income tax plus surcharge |
| Rs. 5-10 lakh | 20% | 4% on income tax plus surcharge |
| Over Rs. 10 lakh | 30% | 4% on income tax plus surcharge |
Considerations:
- As per guidelines, an income of up to Rs. 3 lakh is tax-exempt for senior citizens.
- 10% of income tax is applicable as a surcharge if their overall income is over Rs. 50 lakh and not more than Rs. 1 crore.
- 15% of the income tax amount is applicable as a surcharge if the total income of senior citizens is above Rs. 1 crore.
Income tax slab for citizens aged above 80 years (FY 2021-22)
| Income tax slab | Tax Rate | Health and Education Cess |
| Up to Rs. 5 lakh | No tax | NA |
| Rs. 5-10 lakh | 20% | 4% of income tax plus surcharge |
| Over Rs. 10 lakh | 30% | 4% of income tax plus surcharge |
Consideration
- For super senior citizens, the tax exemption limit is Rs. 5 lakh.
- A surcharge of 10% of income tax is applicable if the total income is over Rs. 50 lakh and not more than Rs. 1 crore.
- A surcharge of 15% of income tax is applicable if the total income of a senior citizen is above Rs. 1 crore.
Also Read: National Pension Scheme (NPS)
Final Word
This is all the information one might need while calculating the taxes of a senior or super senior citizen. From the above points, it is noticeable that the government provides many tax benefits to citizens above 60 years of age. So, for getting complete details on the tax exemptions available to senior citizens, read the above sections carefully.
Frequently Asked Question
1. Which ITR should senior and super senior citizens file mandatorily?
It will depend on the nature of their income:
- If total income is up to Rs. 50 lakh (including income from house property, salary, other sources and agricultural income of not more than Rs. 5,000): ITR 1
- If total income is not more than Rs. 50 lakh (including income from two house properties, capital gain and agricultural income exceeding Rs. 5,000): ITR 2
- Business income or professional earnings: ITR 3
- Presumptive income: ITR 4
2. Should one consider taxable income or gross total income for applying a rebate?
A taxpayer must consider their taxable income while calculating the income tax rebate. On the other hand, one must make deductions on gross total income if his/her taxable income is less than Rs. 5 lakh.
3. Do super senior citizens with an income of less than Rs. 5 lakh need to file an ITR?
No, since the assessed income is below an exemption limit, i.e., Rs. 5 lakh for citizens above 80 years, they are not required to file an ITR. Also, there’s no requirement to pay any amount in case they are following the old tax regime.
4. Can individuals claim tax deductions if they incur medical expenses for their parents?
Yes, if an assessee’s parents are senior citizens, he/she can claim a tax deduction on the medical treatment expenses. However, note that the maximum deduction allowed for this purpose is Rs. 50,000 under Section 80D.
Disclaimer
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
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