A senior citizen enjoys a higher tax exemption limit compared to a non-senior citizen

Posted on: Mar 22, 2021 | | Written by:

A senior citizen enjoys a higher tax exemption limit compared to a non-senior citizen

Published on March 19, 2021 | Est Read Time: 3 min

A senior citizen enjoys a higher exemption limit compared to non-senior citizen

Any individual aged between 60 and 80 years of age is referred to as a ‘senior citizen.’ A person over the age of 80 is termed as a ‘very senior citizen.’ As per India’s income tax laws, special benefits are bestowed upon residential senior citizens as well as highly senior citizens. The main income tax benefits for senior citizens include a higher exemption limit as well as higher deductions under various income tax sections when it comes to one’s medical expenses and interest earned on one’s deposits. Keep reading to learn more about the tax benefits on health insurance for senior citizens.

1. Greater tax exemption limit

The exemption limit is defined as the income up to which an individual is not liable by a country’s government to pay tax. As compared to non-senior taxpayers, senior citizens, as well as very senior citizens, enjoy a greater tax exemption limit. For the financial year 2020–21, the tax exemption for senior citizens in India was set at ₹3,00,000.

For a non-senior or non-highly senior taxpayer, the tax exemption limit rests at an income of ₹2,50,000. An added benefit of ₹50,000 as available through a higher tax exemption limit can be availed to a residential senior citizen. For very senior citizens aged above 80 years an even higher tax exemption limit exists at ₹5,00,000.

2. No need to pay advance tax

The Income Tax Act’s Section 208 states that every individual whose tax liability for the given year is ₹10,000 or more becomes liable to pay advance tax. However, a resident senior citizen gets relief from paying advance tax as per Section 207 of the Income Tax Act. In this section, it is detailed that a resident senior citizen of India is not liable to pay advance tax. However, there is a caveat to this exemption. The senior will not be liable to pay advance tax provided they do not have income from any profession or business.

3. Deduction for payment of medical insurance premium

One of the senior citizen health insurance benefits is that, under Section 80D of the income tax act, medical insurance premiums upto ₹50,000 paid each year by senior citizens are allowed as deductions. If the senior citizen who is paying those medical insurance premiums is doing so for her or his parents who also classify as senior citizens, she or he can claim an additional deduction to the amount of ₹50,000.

4. Eligibility to file income tax return manually

Another benefit senior citizens in India get is when it comes to filing their tax returns. Today, the average taxpayer files his income tax returns electronically. Manual filing is a relic of the past. However, a very senior citizen that is filing tax returns in Form ITR 1 or ITR 4 is afforded the privilege to file returns from their income in paper mode. Hence, electronic filing for tax forms ITR 1 and ITR 4 is not mandatory for highly senior citizens. The citizen could, however, opt for e-filing, if they prefer that mode.

5. Higher deduction limit on bank deposits interest income

Fixed deposits operate by saving up our funds while gradually compounding the interest earned on them. For residential senior citizens in India, the interest earned from bank/post-office/co-operative bank fixed deposits is eligible for deductions under Section 80TTB for an amount upto ₹50,000. Also, keep in mind that there will be no tax-deductible at the source upto ₹50,000.

In fact, the ₹50,000 limit needs to be computed individually for every bank. For individual taxpayer citizens (non-seniors), a tax deduction of upto ₹10,000 under Section 80TTA with respect to one’s interest income for their savings bank account is available.

6. Deduction for medical treatment of specified diseases

Another benefit related to senior citizen health insurance is that, as per Section 80DDB, a senior taxpayer has the benefit of claiming a deduction upto ₹1,00,000 for any expenses that are incurred by her or him on the medical treatment of certain diseases.

7. Benefit of the standard deduction

From the years 2019–2021, a regular deduction upto ₹40,000 against one’s salary income that has been earned during the year has been introduced. Accordingly, any senior who is the recipient of pension from her or his former employer has the privilege of claiming a tax deduction up to ₹40,000 against such salary income.

Conclusion

When it comes to the benefits of senior citizen health insurance or paying taxes for seniors in general, the options to reduce tax liability abound. It’s crucial to be aware of these privileges so one can reap benefits for themselves or their parents. Not only do seniors enjoy a higher tax exemption limit than non-seniors, but they also qualify for a slew of deductions in addition to the option to file certain tax forms manually rather than electronically.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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