The due date for filing income tax returns (ITRs) is around the corner and many senior citizens are wondering if the Income Tax Department has added deductions or special exemptions in store for them. There are tax benefits for senior citizens that most are unaware of. Though the department’s online portal has made tax filing a hassle-free process, an understanding of the income tax benefits for senior citizens is important.
Taxation of interest income
To start with, senior citizens are not subject to the same tax slab rates as their non-senior citizen peers. For example, the income from interest on savings by senior citizens is not taxed in the same way as others. Section 80TTB of the Income Tax Act allows a deduction of up to ₹50,000 on the interest earned from bank account deposits. This means that any interest income exceeding ₹50,000 earned by senior citizens will be taxed as per the applicable tax slab rates.
Treating medical insurance premiums
Securing tax exemptions on medical insurance premiums up to ₹25,000 among non-senior citizens is common. However, the Department realizes that old people are more susceptible to diseases and consequent hospitalization. This explains why the amount of tax exemption is higher in their case. Section 80D of the Act allows senior citizens a maximum deduction of ₹50,000 on medical insurance premiums compared to the ₹25,000 limit stipulated for non-senior citizens. Also, apart from the medical insurance premium payment, senior citizens also earn similar tax exemptions on the amount spent by them on their medical treatment.
Relief from TDS on interest income
Most senior citizens are devoid of regular income, thus, relieving them from any tax liability. Senior citizens completely exempt from income tax payment can submit Form 15H to seek non-deduction of tax deducted at source (TDS) on the interest income from fixed deposits. Considering how the limit for tax deduction under Section 194A for interest income to senior citizens has gone up to ₹50,000, many of them will be able to seek relief from paying TDS on the income earned.
More deduction on expenditure on treatment
Special illnesses beget more treatment expenditure, thus, posing a serious financial burden to senior taxpayers. The Department, therefore, ensures relief to taxpayers on the money spent on medical treatment of specified illnesses under Section 80DDB of the Act. The deductions allowed under this section go up to ₹1,00,000, thus, allowing senior citizens enough scope to save their money otherwise spent on the payment towards taxes.
Exemption from paying advance tax
Senior citizens with zero access to business income do not have to make advance tax payments and are required to pay only self-assessment tax on their total income.
No tax on income from reverse mortgage scheme
This is a very uncommon income source among senior citizens. Many senior citizens these days mortgage their homes for life while the ownership of the property remains with them. One complete payment of the loan amount or the death of the borrower post which the loan is repaid along with the interest amount, the property is transferred to the new legal heir. The amount earned in instalments by the senior citizens under this scheme begets zero tax payment.