Income-Tax returns: How senior citizens can save tax through benefits and exemptions while filing ITR, explained

One of the first concern for many seniors and retired taxpayers is maintaining stable savings and a reliable income. Thus, aligning your investments for good and steady income stream with regular payouts, and reducing your taxes is a win-win. The Income-Tax Act in India allows senior citizens some relief through deductions, exemptions and compliance activities, that they can use to reduce liability.

We discuss some of the benefits that senior citizens in India get while filing their income tax returns.

Exemption benefits

• Higher income exemption limit: Senior citizens above 60 years of age have to pay tax on income of ₹3 lakh and more, under the old tax regime. This is higher than the ₹2.5 lakh exemption for ordinary salaried taxpayers.

Further, super senior citizens of 80 years and above have a higher exemption limit of up to ₹5 lakh annually.

Notably, the new tax regime keeps the basic exemption limit same for seniors and ordinary taxpayers at flat ₹4 lakh annually.

• No requirement of advance tax: For senior citizens, there is no need to pay advance tax, if their income does not come from a profession or from business (i.e. only pension and payouts).

Deductions for seniors

• Standard deduction: All seniors earning a salary or pension can claim standard deduction of ₹50,000 under the old tax regime, and ₹75,000 under the new tax regime.
• Rebate: For income up to ₹5 lakh, senior citizens are allowed rebate under Section 87A as per the old tax regime and are not required to pay any tax.

In the new tax regime, they can claim rebate up to ₹60,000 for income up to ₹12 lakh annually.

• Deduction for medical insurance, expenses: Senior citizens can claim ₹50,000 as deduction on medical insurance premiums under section 80D, compared to ₹25,000 for ordinary citizens. This is under the old tax regime.

Further, they can also claim ₹1 lakh flat deduction under Section 80DDB for medical expenses incurred for specified diseases.

• Deduction on post and bank schemes: Senior citizens can claim deduction up to ₹50,000 on interest earned from savings bank accounts, bank deposits, post office deposits, or cooperative bank deposits under Section 80TTB. This is under the old tax regime and is higher than the ₹10,000 allowed for ordinary investors.

Notably, while investing in a 5-year fixed deposit, principal up to ₹1.5 lakh and interest up to ₹50,000 can be claimed as a deduction under section 80TTB.

• Deduction on investment: Investment of up to ₹1.5 lakh in the government's Senior Citizens Savings Scheme (SCSS) is allowed under Section 80C in the old tax regime.

Can senior citizens stop filing income tax returns?

Once a senior citizen is above 75 years with income only from pension and / or interest they are allowed to avoid filing ITR. However, they have to submit a declaration to the bank and TDS will be deducted under Section 194P.

Thus, it is important for senior citizens to analyse their income stream and plan their investments to optimise for savings and taxes. The status of senior vs super senior can mean a higher exemption limit and investments that provide income interest allow for more deductions. Further, depending on your source of income, you can also plan on choosing old or new regime as beneficial.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.