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Life over the age of 60 is often referred to as the golden years. Most people retire at this age and are finally free from the humdrum of work, family responsibilities, etc. You have enough time on your hands to pursue your hobbies, relax, travel, and spend time with your friends and family. The list of benefits does not end here.
The Government of India also offers some special tax* benefits for senior citizens over the age of 60 that can help you save money. Read on to find out what these are.
To help senior citizens enjoy their retired years and reduce the burden of taxes on them, the government offers various tax benefits to senior and super senior citizens.
Before proceeding to these benefits, it is important to understand the difference between senior citizens and super senior citizens.
Senior citizens: People over the age of 60 but below the age of 80 are known as senior citizens.
Super senior citizens: People over the age of 80 are known as super senior citizens.
Health and life insurance benefits:
Health and life insurance tax benefits make for a long list. Not only does insurance keep you financially secured against emergencies, but it also lets you lower your tax output.
As per Section 80D of the Income Tax Act, 1961, senior citizens can avail of tax deductions up to Rs. 50,000 on th e premiums paid towards a health insurance plan.
Super senior citizens can claim a tax deduction on the health insurance premium as well as the actual expenses incurred on the treatment of the disease.
For life insurance premiums paid, senior citizens can claim a tax deduction up to Rs 1,50,000 every year under Section 80C of the Act. Additionally, the returns earned on life insurance policies, such as regular income, maturity benefit, bonuses, etc., are exempt from taxation under Section 10(10D) (Subject to fulfillment of conditions).
Tax benefits on interest earned:
Interest earned up to Rs. 50,000 from sources like the savings bank account, bank deposits, post office deposits, etc., is tax-exempt for senior citizens under Section 80 TTA of Income Tax Act, 1961.
In order to receive this benefit, you should be a resident of India and over the age of 60. Any interest earned over the limit of Rs. 50,000 will be taxed as per the income tax slab you fall into.
In addition to this, as per the provisions of Section 194A of the Act, no TDS (Tax Deducted at Source) is charged on interest payments of up to Rs. 50,000 by a bank, post office, or a co-operative bank.
Income tax return (ITR) paper filing:
In order to make things simpler and more comfortable for super senior citizens, the Government of India allows people over the age of 80 to fill their ITR manually as well as electronically. Super senior citizens can use the Sahaj/ ITR 1 or Sugam/ ITR 4 forms. You can use the paper mode to file your taxes or do it online. The choice is entirely yours.
No Advance Tax:
Advance tax is a portion of total tax that is paid to the government in installments. According to Section 208, all taxpayers who have an estimated tax liability of at least Rs. 10,000 or more in a financial year have to pay advance tax. However, senior citizens who do not earn their income from a business or profession are exempt from paying advance tax.
High exemption limits:
Here’s a table to explain this better:
Taxpayers below the age of 60
Up to Rs. 2.5 lakh
Up to Rs. 3 lakh
Up to Rs. 5 lakhs
Allowance for treatment of certain diseases:
The Government of India offers tax benefits for senior citizens on the treatment of specific illnesses. As per Section 80DDB, resident individuals over the age of 60 can claim tax deductions up to Rs.1 lakh or the actual expenses incurred, whichever is less, on medical expenses incurred on self or a dependent family member for the diseases listed below:
The limit is only Rs. 40,000 for people below 60.
Chronic renal failure
Tax benefits under the Reverse Mortgage Scheme:
The Reverse Mortgage Scheme allows senior citizens to mortgage their house in return for regular payments. As per the scheme, the house still remains in the name of the owner (senior citizens) till they die, after which it is sold. The regular payments that are made to the senior citizen during their lifetime are entirely tax-exempt.
Standard deductions from pension:
The standard deduction is a flat deduction that salaried individuals and pensioners can claim to lower their tax output. Senior citizens can claim a standard deduction of Rs. 50,000 on income earned from a pension.
Apart from the tax benefits for senior citizens mentioned above, you can also invest in other options to save tax. For instance, as mentioned above, life insurance plans offer tax benefits under Section 80C of the Income Tax Act, 1961. The premiums are tax-deductible up to Rs. 1.5 lakh, and the death benefit received by the nominee is also tax-free.
Senior citizens can consider investing in annuity plans in India. An annuity plan can be the ideal retirement savings tool. You can make a lump-sum payment and start receiving immediate or deferred annuities as per your requirements.
An annuity plan can also be bought with the proceeds of the National Pension Scheme (NPS).
Tata AIA Life Insurance offers great annuity plans and other insurance options that not only help you save money but also lower your taxable income.
Staying up to date with the tax laws and the various benefits for senior citizen in income tax can help you save money in the long run. The tax benefits mentioned above can significantly help you manage your money more efficiently. However, if you are not sure how you can claim these deductions, you can always consult a professional financial advisor or a tax planner.
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Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
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* Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility for tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.