Those who are 60 years or above of age, for all taxation and investment related matters, they are referred to as senior citizens. There are several tax benefits available to senior citizens and in addition there are a few investment options that are either exclusively available to them or come with higher interest rates.
As a senior citizen, the income is largely in the form of pension but still many of them could be earning a salary or consultancy income as well. When it comes to investing, a senior citizen deploys retirement corpus such that there is a regular flow of income to meet household expenses. Further, taxation also needs to be kept into account so as to keep the tax liability at bay.
Here are 10 investment and taxation related benefits that are exclusively available to senior citizens.
1. Income tax Exemption Limits
The income tax exemption limit differs among resident senior citizens and not for NRIs. For those who are between 60 and 80 years, income up to Rs 3 lakh is exempted from income tax. They do not have to pay any tax on income up to Rupees three lakh as the income will be tax-free till that amount. Under income tax rules, those senior citizens who are aged over 80 years are exempted to pay tax for income up to Rs 5 lakh.
2. ITR Filing offline mode
From Assessment year 2019-20 onwards, a very senior citizen filing his return of income in Form ITR 1/ ITR 4 can file his return of income in paper mode, i.e., for him e filing of ITR 1/ ITR 4 is not mandatory. However, he may go for e-filing if he wishes.
3. ITR Filing Exemption
Section 194P of the Income Tax Act, 1961 provides conditions for exempting Senior Citizens from filing income tax returns aged 75 years and above. Conditions for exemption:
Senior Citizen should be of age 75 years or above
Senior Citizen should be ‘Resident’ in the previous year
Senior Citizen has pension income and interest income only and interest income accrued / earned from the same specified bank in which he is receiving his pension.
New Section 194P is applicable from 1st April 2021
4. Advance tax payment
As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of “advance tax”. However, section 207 gives relief from payment of advance tax to a resident senior citizen.
As per section 207 a resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession, is not liable to pay advance tax.
5. Interest income deductible
Section 80TTB of the Income Tax law gives provisions relating to tax benefits available on account of interest income from deposits with banks or post office or co-operative banks of an amount upto Rs. 50,000 earned by the senior citizen (i.e., an individual of the age of 60 years or above). Interest earned on saving deposits and fixed deposit, both shall be eligible for deduction under this provision.
6. Interest income exemption up to Rs 50,000
As a senior citizen if you are earning interest income up to Rs. 50,000 on deposits in bank, post-office or co-operative bank, there will not be any tax deducted at source.
7. Exemption from TDS
As a senior citizen, if the total income in a financial year is within the exemption limit, Form 15H (Form 15G is for non-senior citizens) may be submitted by the depositor to the bank for not deducting TDS. Remember, if the deposits are for more than a year, one has to submit these forms every year ideally in April.
8. Medical insurance premium
For senior citizens, there is a higher tax benefit on health insurance premium payment. On the premium towards self, spouse, children and parents, the maximum deduction that can be availed is capped at Rs 50,000 a year, provided the individual’s age is above 60. Otherwise, the deduction is allowed up to Rs 25,000 if the age is below 60. If the individual is above age 60 and also pays a premium for his or her parents, the total deduction that can be availed is Rs 1 lakh.
Further Section 80DDB of the Income Tax Act allows tax deduction on expenses incurred by an individual on himself or a dependent towards the treatment of specific diseases. The maximum deduction amount in case of a senior citizen is Rs 1 lakh (Rs 40,000 for Non-Senior Citizen taxpayers).
9. Extra on bank FDs
Bank FDs offered to senior citizens who are 60 and above come with additional interest . Most banks offer 0.5 per cent extra on the rack rate of the duration chosen by them. The higher rate is also for any tax-saving deposit opened in the bank. At the time of initial deposit, proof of age is required to be submitted to the bank.
In addition, many banks had introduced special FD plans for senior citizens for the tenure of 5 years and more. On investments made by senior citizens in such schemes, an additional interest rate was applicable in addition to the extra that they were already entitled to.
10. Senior Citizens’ Saving Scheme
Probably the first choice of most retirees, Senior Citizens’ Saving Scheme (SCSS) is a must-have in most retirees’ investment portfolio. As the name suggests this scheme is available only to senior citizens or early retirees. SCSS can be availed from a post office or a bank by anyone over the age of 60 years. SCSS has a five-year tenure, but it can be extended for three years after the scheme matures. The upper investment limit is Rs 15 lakh and one may open more than one account. The interest is payable quarterly and fully taxable.