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Investments for Senior Citizens – Income Tax and Other Benefits

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It’s the responsibility of every citizen of the country to declare their income and pay tax accordingly. And you continue to bear this responsibility even after your earning days are over. However, the good thing is, many health insurance tax benefits are given to senior citizens owing the fact that most people have a limited source of income after 60. So, once you enter your golden years, your sources of income might include pension money, rental income, interest on savings, fixed deposits, etc. But in absence of any other financial help, the income might not be enough to lead a good life. Even a single case of hospitalisation can make a big impact on your savings. That’s the reason why the government gives you various tax benefits after 60, even on senior citizen health insurance. Read on to learn about them.

ITR Filing

Income Tax Return (ITR) is a form which contains information about your income and the taxes that you need to pay to the Income Tax Department during the year. The tax is calculated based on the income earned. ITR filing is mandatory for every individual or business who earns any income during a financial year to file the return every year. The income can be in the form of business profits, salary, and income from house property or through dividends, capital gains, interests or other sources. Itneeds to be filed within a specified date after which you will need to pay a penalty.

ITR Filing offline mode

From Assessment year 2019-20, a senior citizen can file ITR in Form ITR 1/ ITR 4in the offline mode. E-filing is not compulsory.

Advance Tax Payment

Advance tax payment is the income tax that you pay in advance instead of making a lump sum payment at the end of the year. Also known as “pay as you earn” tax, advance tax is paid in instalments as per the due dates fixed by the Income Tax Department. Usually, if someone’s tax liability exceeds INR 10,000 after deducting the TDS, they are liable to pay advance tax. But senior citizens are excluded from paying advance tax.

Deduction available on deposits

Section 80TTB provides tax relaxation to senior citizens on the income earned through deposits. If you are an Indian resident above 60 years, then in a financial year, you can claim a deduction of up to INR 50,000. This section is meant to make the lives of senior citizens more comfortable. Section 80TTB is exclusive to senior citizens while according to Section 80TTA, those who are below 60 can get tax deductions only up to INR 10,000.

TDS benefit

TDS or Tax Deducted at Source is the tax deducted by your employer at the time of paying salary. For senior citizens, no tax will be deducted at source from payment of interest by bank or post-office or co-operative bank up to INR 50,000.

Medical insurance premium

As per section 80D of the Income Tax Act, a senior citizen can avail tax benefits on the premium paid towards senior citizen health insurance. If you are above the age of 60,youcan avail a maximum tax deduction of INR 55,000 per year.

Higher tax exemption limit

If you are a senior citizen i.e. between 60-80 years, then the tax limit is INR 3,00,000. But if you are below 60, as a taxpayer, you will get an income tax exemption of INR 2,50,000 only. If you are above 80,youcan avail an exemption of up to INR 5,00,000. However, higher tax exemption limit cannot be availed in the new tax regime.

Form 15H

Form 15H is a self-declaration form meant exclusively for senior citizens. They need to submit this form to the bank asking not to deduct TDS on the interest earned from fixed deposits. The form states that their income is within the exemption limit and hence not to deduct TDS. Form 15 needs to be submitted every year. PAN is compulsory.

Senior Citizens’ Saving Scheme

Senior Citizens’ Saving Scheme (SCSS) is a Government-backed savings scheme that offers retirement benefits to senior citizens. By investing a lump sum amount in the scheme, either individually or jointly, senior citizens can have access to regular income after retirement. The SCSS account can be opened in any authorised bank or post office. The maximum amount that you can invest in the scheme is INR 15 lakhs and it also offers tax benefits. The maximum tenure of the scheme is 5 years but can be extended for 3 years after maturity.

Extra on bank FDs

For senior citizens, leading banks give a special rate of interest on fixed deposits. The interest on Senior Citizen Fixed Deposits (FDs) is usually 0.50% higher than that is given to the general public. The better interest rate helps you earn more in your post-retirement years. And if FD is for a 5-year lock-in period, then it can be used as a tax-saving measure under Section 80c.

Conclusion

With no steady flow of income, as a senior citizen,you might find it difficult to make ends meet if you are overburdened with tax. That’s why the government is giving you tax benefits as mentioned above, whether it is on senior citizen health insurance or fixed deposits or other investment plans. Make the most of them.

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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