Know the Basic Exemption Limit for Senior Citizen

15 March, 2023

With retirement and old age, a person’s earnings tend to decrease. Besides, it gets cumbersome for senior citizens to abide by the tax compliance measures on a quarterly and annual basis. Keeping all of these in mind, the government ensures that senior citizens don’t end up paying higher taxes or spend too much time in tax compliance.

Let us look at the basic exemption limits for senior citizens, along with various other tax benefits that they can enjoy.

Income tax slab for senior citizen

As most of you would know, the Income Tax Act further divides senior citizens into two categories: senior citizens and super senior citizens. The income tax slab for senior citizens above the age of 60 but below the age of 80 is as follows,

If the taxpayer is aged 80 years or more at any time during the previous year, the applicable income tax slab changes in the old regime but remains unchanged in the new regime,

The new tax regime has now introduced a standard deduction of ₹ 50,000 for pensioners, including family pensioners. A senior citizen with an income of ₹ 7.5 lakhs will have no tax liability in either tax regime. This is assuming that the person claims maximum deductions and exemptions (including the standard deduction of ₹ 50,000) in the old regime. The net income becomes ₹ 5 lakhs and thus, eligible for the section 87A rebate - hence no taxes. Similarly, in the new regime, if you deduct the newly introduced standard deduction from the ₹ 7.5 lakhs, net taxable income becomes ₹ 7 lakhs, which is the new tax-free slab.

The tax liability under both regimes must be compared as it changes with the senior citizen's income and standard deduction eligibility/non-eligibility.

Various income tax benefits for senior citizens

As evident from the tables above, senior and super-senior citizens enjoy a higher basic exemption limit. However, they also enjoy various other concessions when it comes to income tax.

1. Advance tax - A senior citizen is not required to pay advance tax during the year unless he or she has income from “Profits and Gains from Business or Profession”. Normally, any person with an estimated tax liability of ₹ 10,000 or more must deposit advance tax.
   
   

2. Standard deduction - A senior citizen who receives pension income can claim a deduction of up to ₹ 50,000 against such income.
   
   

3. Medical deductions - The maximum deduction allowed to individuals against health insurance premiums paid is ₹ 25,000. However, senior citizens are eligible for a deduction of up to ₹ 50,000 on health insurance premiums paid. Besides, a sum of ₹ 50,000 is allowed to meet medical expenses incurred for the treatment of a senior citizen, provided no payment was made for the health insurance of the patient. This can be claimed only for medical expenses paid by a mode other than cash.
   
   

4. Medical expenses - Section 80DDB allows ₹ 40,000 as a deduction for expenses on treatment of specific diseases or illnesses for dependent relatives or self. In the case of dependent senior citizens, the deduction increases to ₹ 1 lakh.
   
   

5. Interest on savings account - Section 80TTA allows deductions of up to ₹ 10,000 against interest income from the savings account. In the case of senior citizens, this deduction increases to a maximum of ₹ 50,000. Besides, the bank or post office doesn’t deduct any TDS on such interest income. You should consider HDFC Bank Savings Accounts and fixed deposit accounts to earn a superior interest income on your balance. HDFC Bank offers attractive interest rates for its valued senior citizen customers.
   
   

6. Offline ITR - Super senior citizens with a total income of more than ₹ 5 lakhs or having a refund claim can file ITR 1 or ITR 4 in paper mode as electronic filing is not mandatory for them.
   
   

7. Form 15H - If the estimated total income of a senior citizen is close to NIL during the previous year, he or she can submit Form 15H to a payer for non-deduction of TDS.
   
   

8. Capital gains - A senior citizen will not be liable to capital gain tax in case of transfer of a residential property under a reverse mortgage scheme.
   
   

9. Non-filing of ITR - From the assessment year 2022-23, senior citizens of 75 years or more with only pension income and interest income on the same are not required to file ITRs. The bank where they receive and maintain their pension income will compute their total income and deduct taxes as applicable.
   
   

Thus, senior and super-senior citizens have been provided various tax benefits under the Income Tax Act, 1961. This includes a higher basic exemption slab, higher deductions on medical premiums, interest income, waiver of deductions, filing formalities, etc. The Income Tax department ensures that you can enjoy your golden years with lower tax liability and formalities.

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*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.