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10 Special Tax Benefits for Senior Citizens
- DetailsWritten by PolicyBazaar -
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Modified 13 October 2017
India takes pride in being a place where its elders are respected and taken care of. There are a few programs that are run by the government to offer special tax benefits to the senior citizens. These tax benefits are offered so that the senior citizens don’t find themselves in a financial crunch in this phase of their lives. This article will help you a great deal in order to know about the benefits offered by senior citizen health insurances in the form of special tax deductions.
Before you have a look at these tax benefits, you must know what the definition of a senior citizen is.
Who is a Senior Citizen?
According to the Indian Income Tax Act, any person who is 60 years of age or above is qualified to be considered as a senior citizen.
The age for qualifying to be a senior citizen used to be 65 years. Now, it has been reduced by 5 years. With effect from the financial year 2011-12, the qualifying age has been changed to 60 years. Individuals who are above the age of 80 years fall in the category of very senior citizens.
Once the age of 60 years is attained, the status of a senior citizen offers him a sense of relief. Here are a few of income tax deductions offered to the senior citizens mentioned below.
1. High Tax Exemption Limitation
With effect from the financial year 2011-12, the age of qualifying for the senior citizens is changed to 65 years from 60 years. Not just that, from the assessment year 2015-16; the limit of exemption for the senior citizens has been increased from Rs 2.5 Lakh to Rs 3 Lakh. A fresh category of Very Senior Citizens for the people, who are 80 years of the age and above, has been generated. Very senior citizen people are eligible for an enhanced tax exemption of upto Rs 5 Lakh from the assessment year 2012-13. The tax deduction limit offered to a senior citizen as well as a very senior citizen is mentioned below:
Very Senior Citizen
A senior citizen gets a higher tax deduction limit in comparison to a non-senior citizen. The deduction limit available for a resident senior citizen for the fiscal year 2016-17 is Rs 3 Lakh. In simple terms, any kind of tax isn’t levied on a resident senior citizen if his/her income is up to Rs 3 Lakh. The deduction limit for any non-senior citizen is Rs 2.5 Lakh. An add-on benefit of Rs 50 thousand as a higher deduction limit is offered to a resident senior citizen in comparison with the non-senior citizen taxpayers.
A very senior citizen is offered a higher tax exemption as compared to senior citizen. The tax deduction available for a resident very senior citizen for the fiscal year 2016-17 is Rs 5 Lakh. In simple terms, any kind of tax isn’t levied on a resident very senior citizen if his/her income is up to Rs 5 Lakh. The deduction limit for a non-senior citizen is Rs 2.5 Lakh. An add-on benefit of Rs 2.5 Lakh is offered as a higher deduction limit to a resident very senior citizen in comparison with the non-senior citizen taxpayers.
2. Reverse of Mortgage for the Senior Citizens
A reverse mortgage is a concept that makes a senior citizen eligible to avail monthly streams of income by mortgaging any accommodation owned by that individual. A reverse mortgage is created according to a scheme notified and made by the Central Government is not transferable under Section 2(47).
3. Increased Tax Deductions on Health Insurance
Senior citizens are eligible to avail a higher exemption of Rs. 20,000 under Section 80D. This limit has been increased to Rs. 30,000 from the assessment year 2016-17.
4. Tax Deductions for Medical Expenses for Very Senior Citizens
From the assessment year 2016-17, any expenditure made for any healthcare expenses for a very senior citizen comes with tax benefits. In case no payment is made, and if the premium doesn’t exceed Rs 30,000; it shall be considered eligible for a deduction as per section 80D.
5. Higher Tax Deduction under Section 80DDB for Senior Citizens as well as Super Senior Citizens
Section 80DDB offers a tax deduction to a policyholder based on the expenses incurred for the treatment of certain diseases. Generally, this tax exemption is offered up to Rs. 40,000. Although, if a senior citizen undergoes medical treatment; the deduction of Rs. 60,000 is allowed.
Assessment year2016-17 onwards, a higher limit exemption of up to Rs. 80,000 is permissible for the money spent on the healthcare treatment specifically for a very senior citizen.
6. Relief from Regular Income Tax Scrutiny
Treasuring the concerns of taxpayers and in order to lessen their inconveniences, Central Board of Direct Taxes has updated its selection process for scrutiny. To be able to provide redressal for grievances (if any), a decision has been taken during the fiscal year 2011-12.
The cases involving senior citizens along with the small taxpayers, the filing of income-tax returns (in ITR 1 &ITR 2) will only be scrutinized when the IT department has some credible information. For this particular objective, the senior citizens are the people who have attained the age of 60 years or above.
7. Senior Citizens and the Business Income Exemption from the Payment of Advance tax
From the fiscal year 2012-13, according to Section 208, any senior citizen who is a resident of India and does not earn income chargeable in the category of “Profits and gains of business or profession” won’t be charged any advance tax. Such senior citizens would be permitted to discharge his/her tax liability (apart from TDS) by making the payment of self-assessment tax.
8. Higher Rate of Interest
The senior citizens enjoy a higher rate of interest i.e. up to 50 basis point on a fixed deposit for 5 years, that is exempted from the total income as per Section 80C.
9. Tax Benefits on the TDS
A senior citizen can enjoy tax benefits on the TDS for the income generated by the interest earned on the deposits. All they need to do is submitting the Form 15H as per Section 197 of the Income Tax Act.
10. Relief from of Income Tax e-filing to very Senior Citizen
From the assessment year 2015-16, any taxpayer who files income tax return in Form ITR 1/2/2A and he/she has a refund claim or he/she have a total income of Rs.5 Lakh or more needs to file his/her income tax electronically. He/she can put his/her digital signature. Especially for very senior citizens, income tax law offers relaxation from electronic filing so that income tax filing process becomes convenient for them.
In simple terms, the very senior citizens filing their income tax return in Form ITR 1/2/2A having a total income Rs.5 Lakh and above or having any refund claim can process his income tax return in the paper. For such individuals, e-filing of income tax return 1/2/2A isn’t compulsory. Although, if he/she wants to; he/she can opt for e-filing his/her income tax returns.
The Age Criteria and Benefits
Before you understand the age factor, it’s crucial to understand the tax deductions offered according to the law of income tax for a senior citizen and very senior citizen. These benefits are available specifically to the resident senior citizens as well as resident very senior citizens.
In simple terms, the tax deductions aren’t available for a non-resident despite him/her being of a higher age. The age factor and other factors to be eligible as a senior citizen and very senior citizen according to the income tax law are mentioned below.
The Criteria for senior citizen
The criteria for very senior citizen
He/she must be 60 years of age or above but the age must be lesser than 80 at any time during the particular year.
He/she must be 80 years of age or above at any time during the particular year.
He/she must be a resident of India.
He/she must be a resident.
Mr. Kapoor is a resident of India. He attained 60 years of age during the fiscal year 2016-17. Is he eligible to fall into the category of a senior citizen as per the income tax laws for the fiscal year 2016-17?
Yes, Mr. Kapoor is a resident of India and 60 years of age during the financial year 2016-17 so he would be considered as a senior citizen as per the Income-tax law for the fiscal year 2016-17.
2. Mr. Rakesh is a non-resident and he has attained the age of 60 years during the fiscal year 2016-17. Is he eligible to fall into the category of a senior citizen as per the income tax law for the fiscal year 2016-17?
Since Mr. Rakesh is an NRI, the tax exemptions offered to senior citizens as per the income tax law are exclusively available for a resident only, that is why Mr. Rakesh won’t be considered as a senior citizen as per the Income-tax law for the fiscal year 2016-17.
Mr. Batra is a resident of India. He attained 80 years of age during the fiscal year 2016-17. Is he eligible to fall into the category of a very senior citizen as per the Income-tax Law for the fiscal year 2016-17?
Yes, Mr. Batra is a resident and he is 80 years of age during the year financial 2016-17, so he would be considered a very senior citizen as per the Income-tax law for the fiscal year 2016-17.
2. Mr. Batra is a non-resident and he has attained the age of 80 years during the fiscal year 2016-17. Is he eligible to fall into the category of a senior citizen as per the Income-tax law for the fiscal year 2016-17?
Since Mr. Batra is an NRI, the tax exemptions offered to the very senior citizen as per the income tax law are exclusively applicable for a resident only, that is why Mr. Batra won’t be considered as a very senior citizen under as per income tax law for the fiscal year 2016-17.
Now you know how important Health Insurance in India is for the senior citizens and very senior citizens. The benefits offered by these plans are very helpful financially. Medical insurance is an absolute necessity at that phase of life. The tax benefits are the icing on the cake. If you are a senior citizen or very senior citizen or you have a senior citizen or very senior citizen parent get your/their health insured.
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