Senior Citizen Concession in Income Tax Act

CA AYUSH AGRAWAL (Kolkata-Pune-Mumbai) (26986 Points)

09 November 2020  

Senior citizens in India are provided with special income tax benefits that include tax exemptions on certain incomes to higher deductions for select expenses in consideration of their limited income-earning ability and higher medical expenditure.

With knowledge of such benefits, senior citizens will be able to plan their investments better and even save on income tax outgo.


Who are called senior citizens for income tax purposes?

As per Indian income tax rules, an individual resident between the age of 60 to 80 years in a particular financial year is considered a senior citizen. Residents older than 80 years of age are called super senior citizens. Here are some benefits that they are entitled to:


1. Exemption limit Senior citizens enjoy a higher basic exemption limit. A basic exemption limit is a level of income up to which a person is not liable to pay taxes to the government. While for ordinary residents the exemption limit is Rs 2.5 lakh per financial year, it is set at Rs 3 lakh for senior citizens. For super senior citizens, the limit is higher at Rs 5 lakh.

2. Higher exemption on interest income from deposits It is common for senior citizens to opt for different fixed deposit interest income sources to aid their day-to-day earnings. FDs provide security and steady income, unlike equity-linked investments.

As for tax benefits, interest amount of up to Rs 50,000 in a financial year earned on saving deposits and fixed deposits with banks or post office or co-operative banks earned by the senior citizen is eligible for deduction under Section 80TTB. This limit is much lower at Rs 10,000 for younger resident taxpayers in India.

Banks compute this income individually for their customers and deduct tax at source on the customers' behalf. Senior citizen taxpayers with higher interest income but total income below the exemption limit can submit Form 15H at the start of a financial year, to their bank/post office or a cooperative bank to prevent the deduction of TDS (tax deducted at source).  

3. Deduction for payment towards medical insurance premium Medical insurance premium of up to Rs 50,000 paid in a year by a senior citizen is allowed as a deduction under Section 80D of the Income Tax Act. This deduction is also allowed to younger taxpayers who are paying medical insurance premiums for their senior citizen parents.


4. Deduction for expenses incurred on medical treatment Section 80DDB of the Income Tax Act allows senior citizen taxpayers to claim a deduction of up to Rs 1 lakh for expenditure incurred by them on medical treatment of specified diseases.

5. Offline income tax returns (ITR) filing While all taxpayers have to mandatorily file their income tax returns (ITR) online, senior citizens are allowed to file Form ITR 1 or ITR 4 offline in the paper form, if he/she does not prefer the online mode.

6. Exemption from paying advance tax Section 208 of the Income Tax Act requires any person with an estimated tax liability for the year of Rs 10,000 or more, to pay an advance tax. However, section 207 provides relief from payment of advance tax to a resident senior citizen who does not have any income from business.