Income Tax Benefits for Senior Citizens

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Income Tax Benefits for Senior Citizens

Benefits for senior citizens have been incorporated in various provisions in the Income Tax Act. The Government of India (GoI) observed that senior citizens were finding it difficult to meet their routine requirements on account of financial difficulties. Hence, to help senior citizens, the Government has introduced several provisions in the Act. A person becomes a senior citizen under the terms of the Income Tax Act in any year after attaining the age of 60. Once an individual attains 60 years, his position as a senior citizen in that financial year allows various reliefs for that person under the Act. Further, enhanced benefits are available to individuals who have crossed 80 years of age, known as the category of Super Senior citizens. The present article discusses the various tax benefits, higher exemption limit, reverse mortgage facility, medical insurance and higher deductions relevant to senior citizens in India.

Highlights of the Tax Benefits Available for Senior Citizens

  • The basic exemption limit for senior citizens is fixed at Rs. 3, 00,000. Consequently, any senior citizen with a total income of up to Rs. 3,00,000 will not be required to pay any income tax.
  • Reverse mortgage scheme related to senior citizens’ reverse mortgage transactions was introduced by the Finance Act 2007. The concept of Reverse mortgage is extensively prevalent in western countries. A reverse mortgage permits senior citizens to encash the value of their property in their later years. Introduced recently, a reverse mortgage enables a senior citizen to be able to obtain monthly income streams by mortgaging a house that is owned by him. Income tax act has particularly provided that the reverse mortgage created under a scheme made and notified by the Central Government will not be considered as a transfer as a consequence. Hence there will be no capital gains tax. The scheme provides that a senior citizen will be able to benefit of monthly income streams by mortgaging a house owned as self-occupied property. The details of the scheme are provided below for reference:
  • Tax benefits on medical insurance has been enhanced. A senior citizen can obtain a benefit to the extent of Rs. 20,000 with reference to Section 80D.
  • Higher Deduction under section 80DDB enables deduction to an assessee in case of expense on medical treatment of specific ailments. Normally this deduction is accessible up to Rs 40,000. However, if the patient is a senior citizen, then a deduction of Rs 60,000 is permissible. This facility is over and above the benefits enabled under section 80C of the Act. Additionally, the deduction is accessible even on medical expenditure incurred, provided the related individual does not have a health insurance policy.
  • No TDS on earning of interest below Rs 10,000: From 1/6/2007, the interest paid to a senior citizen will be subject to TDS only if interest paid with reference to Section 194A is in excess of Rs 10,000. The said interest must be paid or credited under Senior Citizen Saving Scheme. 

Tax Benefits – Medical Insurance

Section 80D provides for tax relief related to medical insurance premium paid by a senior citizen. For normal citizens, this limit is merely ten thousand rupees. However, senior citizens are eligible to obtain a higher deduction of Rs 20,000 with reference to Section 80D.

Higher Deduction under Section 80DDB

Section 80DDB provides deduction to an assessee in the occasion of expense on medical treatment of specific ailments. Normally this deduction is allowable up to Rs 40,000. Nevertheless, if the patient is a senior citizen, then a deduction of Rs 60,000 is permissible.

No Routine Income Tax Scrutiny

In cases of senior citizens and small taxpayers, filing income-tax returns in ITR-1 and ITR-2 will be subjected to examination only where the Income Tax department is in possession of credible information. 

Other Related Guides

Form 61B Form 61B - Income Tax Statement of Report able Account under sub-section (1) section 285BA of the Income-tax Act, 1961
Form 3CEFB Form 3CEFB- Income Tax Application for Opting for Safe Harbor in respect of Specified Domestic Transaction
Form 61 Form 61 - Income Tax Statement containing particulars of declaration received in Form No. 60
Form 10CCE Form 10CCE- Income Tax Certificate under sub-section (2) of section 80RRB for Patentees in receipt of royalty income, etc.
Self-Assessment Tax E-Payment Self-Assessment Tax - E-Payment Self-Assessment tax means the tax obligation of a taxpayer after considering tax deducted at source and advance tax. ...

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