Compared to non-senior citizens, senior citizens get additional tax benefits as they usually don't have regular source of earned income.
For income tax purpose, assessees are categorised age-wise into two basic categories – Senior Citizens, who are over 60 years of age, and Non-senior Citizens or Ordinary Individuals, who are up to 60 years of age. Senior citizens are further categorised into – Senior Citizens, who are over 60 years, but below 80 years of age, and Very Senior Citizens, who are 80 years and above.
Compared to non-senior citizens, senior citizens get additional tax benefits as they usually don’t have regular source of earned income.
Following are the tax benefits of senior citizens in comparison to non-senior citizens:
Basic Exemption Limit
The basic exemption limit for ordinary individuals is up to Rs 2,50,000, while the limit for senior citizens is Ra 3 lakh and that of very senior citizens is Rs 5,00,000 in a financial year.
Deductions for Medical Insurance Premium
The deduction limit u/s 80D of Income Tax Act on account of payment of medical insurance premium in a financial year in any mode, other than cash, is up to Rs 25,000 for ordinary individuals, but for senior citizens, the deduction limit is up to Rs 50,000.
Deductions on Interest Income
While ordinary individuals get deduction up to Rs 10,000 u/s 80TTA of I-T Act on interest earned in savings bank account only in a financial year, senior citizens get deductions up to Rs 50,000 in a financial year u/s 80TTB of the Act on interest earned in savings bank account as well as on any deposits in banks and/or post office.
Deductions on Treatment of Specified Diseases
Tax deductions on expenses made for treatment of specified diseases of an ordinary individual is Rs 40,000 in a financial year u/s 80DDB of the I-T Act, while the deduction limit for expenses made for such treatment of a dependent senior citizen is Rs 1 lakh.
Exemption on paying Advance Tax
While ordinary individuals need to pay advance tax if total tax liability in a financial year is Rs 10,000 or more, senior citizens are exempted from paying advance tax, unless the source of earnings contains ‘Income from Business or Profession’.
Filing ITR Manually
Ordinary individuals having total income of over Rs 5 lakh and/or to claim tax refund need to e-file their Income Tax Return (ITR), but very senior citizens (over 80 years of age), eligible to file either Sahaj (ITR 1) or Sugam (ITR 4), have the choice to file such returns either manually or electronically.
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Tax on Transfer of Property under ‘Reverse Mortgage Scheme’
Neither capital gain tax nor any other tax is payable by senior citizens in case of transfer of residential house property by way of reverse mortgage under Reverse Mortgage Scheme.
Like their salaried non-senior counterparts, retired senior citizens who are getting pension, may avail standard deduction Rs 40,000 in a financial year.