Earnings tax advantages for seniors and really seniors for fiscal 2020-21

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Income tax benefits for seniors and very seniors for fiscal 2020-21

Income tax benefits for seniors and very seniors for fiscal 2020-21

New Delhi: Indian Income Tax Law offers several advantages to seniors and very seniors. Note that only resident senior citizens can avail of these tax benefits. According to the income tax rules, a person between 60 and 80 years of age is classified as a “senior” and a person over 80 years of age is classified as “very senior”. Benefits for resident seniors and senior citizens range from a higher exemption limit to deductions.

List of Income Tax Benefits for Seniors and Very Seniors:

1. Tax exemption limit: Seniors and very seniors receive a higher exemption level compared to regular taxpayers or non-senior taxpayers. The exemption limit for non-senior citizens is Rs 2.5 lakh. However, for the 2020-21 fiscal year, the exemption limit for a senior is Rs 3 lakh, which means an additional benefit in the form of Rs 50,000 is available to a resident senior. Very seniors receive a higher exemption limit of Rs 5 lakh.

2. Tax exemption:Under Section 208 of the Income Tax Act, any person whose estimated tax liability for the fiscal year is Rs 10,000 or more pays the tax in advance in the form of “input tax”. Section 207 of the IT Act, however, gives seniors and super seniors some relief when it comes to paying input tax. A resident senior who has no business or professional income is not required to pay input tax.

3. Online ITR filing not mandatory: As older generations are not as tech-savvy and often struggle with technology, seniors filing their income tax return in the form of ITR 1 or ITR 4 can file their income tax return on paper. This means that electronic filing of ITR 1 or ITR 4 (as the case may be) is not mandatory for very senior citizens. However, if you are comfortable with the technology and have no problem filling out your return online, you can opt for electronic filing as well.

4. Standard deductions from pension income: Seniors receive a standard deduction of Rs 50,000 based on their retirement income.

5. No Taxes Under the Reverse Mortgage Scheme: A senior can cancel a mortgage on one of their properties to generate monthly income. Ownership of the property remains with the senior citizen and he receives monthly payments for it. The amount paid to the owner in installments is exempt from income tax.

6. Tax deduction benefits:

  • Interest income on bank deposits (80TB): Interest income on savings and time deposits at banks, post offices or credit unions of up to Rs 50,000 earned by the senior may be deducted under Section 80TB of the Income Tax Act. There will be no deduction up to Rs 50,000. Note that this limit of Rs 50,000 must be calculated for each bank individually.
  • Payment of Insurance Premium (80D): According to income tax rules, a health insurance premium paid by a senior up to Rs 50,000 per year can be deducted under Section 80D of the IT Act. If the senior pays health insurance premiums for their parents, who are also seniors, they can apply for an additional deduction of up to Rs 50,000, which means they are entitled to a deduction of up to Rs 1 lakh.
  • Medical Treatment (80DDB): Pursuant to Section 80DDB of the Income Tax Act, a senior citizen taxpayer can request a tax deduction of up to Rs 1 lakh for expenses related to medical treatment of certain diseases.