Tax & Other Benefits For Senior Citizens

India has always been a society that has cared for and respected its elders. It is no surprise then that the government offers various tax benefits for the elderly so that they do not face any unnecessary financial burden in their sunset years. Here is a look at the various tax deductions on offer for them.

Tax benefit for medical insurance under Section 80D

Any payment made by a senior citizen towards health insurance premium gets tax exemption under section 80D of Income Tax Act 1961. As a senior citizen, you can avail a tax deduction of Rs. 30,000 from the assessment year 2016-17. If you are above 60 years of age and are also paying medical insurance premium for your parents above 60 years, you can get a combined tax deduction of Rs. 60,000.

Deductions for a specified disease under Section 80DDB

If you are a senior citizen and are suffering from a critical illness, you can avail a tax deduction of up to Rs. 60,000 under Section 80DDB. The deduction limit is increased to Rs. 80,000 if you come under the very senior citizen category. The disease you suffer from should be one among the listed ones or approved by the department. You will need to furnish a certificate from the hospital or from a medical specialist recognized by the Medical Council of India to be eligible for this deduction.

No advance tax payment

Senior citizens who have any business income are exempted from filing any advance tax payment. Instead of advance tax, all you need is to pay a self-assessment tax on your overall income in the financial year.

Non-deduction of TDS on interest on FD

If, as a senior citizen, your overall income is below the taxable limit, then you can make use of form 15H to instruct the banks to not deduct any TDS on the interest you earn on your fixed deposit investment. You will however need to submit form 15H every financial year to avoid TDS deduction.

No routine IT scrutiny

Income tax scrutiny can drain the spirit of any regular taxpayer. To avoid the mental stress of your case coming up for IT scrutiny, the IT department has made it clear that routine scrutiny cases will not involve any senior citizens unless the department has real creditable information to initiate scrutiny proceedings.

E-filing not mandatory for very senior citizens

Very senior citizens may not be comfortable with modern day technology and the IT department has granted a relaxation for all taxpayers who fall in the category for mandatory e-filing. Anyone who qualifies as a very senior citizen does not necessarily need to use the e-filing mode to opt for a refund claim and can make the request in a paper format.

No tax on reverse mortgage loan

Reverse mortgage loans allow senior citizens above 60 years to receive a regular income by mortgaging a self-owned and self-occupied home. The money received through a reverse mortgage loan is not considered as income, and is free from any tax liability, making it an attractive option for senior citizens.Senior citizens deserve financial freedom in their sunset years and hence the government offers various tax deductions to make their life easy.

Relief to Senior Citizens proposed:-

Ø  Exemption of interest income on deposits with banks and post offices to be increased from Rs. 10,000 to Rs. 50,000.

Ø  TDS not required to be deducted under section 194A. Benefit also available for interest from all fixed deposit schemes and recurring deposit schemes.

Ø  Hike in deduction limit for health insurance premium and/ or medical expenditure from Rs. 30,000 to Rs. 50,000 under section 80D.

Ø  Increase in deduction limit for medical expenditure for certain critical illness from Rs. 60,000 (in case of senior citizens) and from Rs. 80,000 (in case of very senior citizens) to Rs. 1 lakh for all senior citizens, under section 80DDB.

Ø  Proposed to extend Pradhan Mantri Vaya Vandana Yojana up to March, 2020. Current investment limit proposed to be increased to Rs. 15 lakh from the existing limit of Rs. 7.5 lakh per senior citizen.

Ø  Standard dedcution of Rs 40,000 for pensioners. 

The increase in tax exemption limit for interest income for senior citizens will be a big relief as this category derives most of its income from bank FDs and post office schemes. The increase in tax breaks for insurance and medical expenditure is also beneficial.