Now is the time of year when you must file your income tax (IT) returns. As the July 31 deadline approaches, it is time to review the tax deductions and exemptions that seniors (age 60 or older) can claim when filing their tax returns. These are in addition to what every taxpayer, regardless of age, is permitted.
Senior citizens (not in employment) must claim tax deductions against their advance tax liability, if applicable, or self-assessment tax at the time of filing their returns.
Also, your slab rates will vary depending on whether you are a resident senior citizen (aged 60 or older but younger than 80) or a super-senior citizen (aged 80 or older) and the tax regime (old or new) that you choose.
If you choose the previous tax system, you are eligible for a number of exemptions and deductions (see graph). If you choose the new concessional tax regime, however, only some of these will apply. In addition, you may be exempt from the requirement to file tax returns in certain circumstances.
Increased basic exemption and submitting returns
For the financial year 2023 (April 1, 2022 to March 31, 2023), senior and super-senior citizens residing in India were permitted a basic exemption limit of Rs 3 lakh and Rs 5 lakh, respectively. That is, they are exempt from paying income tax on their taxable income up to these thresholds. The exemption limit for taxpayers who are not senior citizens is Rs 2.5 lakh.
Under the new tax framework, however, all resident individual taxpayers, regardless of whether they are 60 or older, have a basic exemption limit of Rs 2.5 lakh for FY22-23 (see table for details). If their income is below the minimum exemption amount, they are exempt from filing tax returns.
“Until FY2022-23, the previous tax regime served as the default. According to Mayank Mohanka, Partner at S M Mohanka & Associates, super-senior citizens who opted for this exemption were not required to file tax returns if their annual income was below Rs 5 lakh.
Regarding FY23-24 and beyond, he states, “From FY23-24, the new tax regime has been made the default regime, so all taxpayers, including those aged 60 or older, are exempt from filing returns if their total annual income is less than Rs 3 lakh.”
Aside from this, those aged 75 or older who satisfy the requirements of section 194P of the IT Act are exempt from filing tax returns. A senior citizen must have been an Indian resident during the fiscal year for which the return is being lodged, among other requirements. He must have only pension and interest income, with the interest income coming from the same bank as the pension.
For this purpose, the bank must be a’specified bank’ as designated by the federal government. A senior citizen must submit a declaration (stating that he has no other income) to the designated bank, which will then deduct TDS after considering deductions under chapter VI-A (sections 80C to 80U) and the rebate under section 87A.
In response to a question regarding the number of senior citizens who qualify under this section, Mohanka explains, “The requirement to meet all of the above-mentioned conditions restricts the benefit of not filing tax returns to a very small subset of senior citizens.”
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Tax exemption on advance payment
According to section 207 of the IT Act, a domiciled senior citizen (age 60 or older) is exempt from paying advance tax if he or she has no business or professional income. Partner and Head of Global Mobility Services, Tax at KPMG India, Parizad Sirwalla, notes that this exemption is also available under the new tax regime.
Allowance for interest revenue
Under section 80TTB of the IT Act, a domiciled senior citizen (60 or older) may deduct up to Rs 50,000 of interest income earned in a financial year. This applies to interest income from bank savings accounts, time deposits, and deposits with post offices and cooperative banks. This deduction is no longer available under the current tax system.
In addition, under section 194A, no TDS is deducted from interest payments to domiciled senior citizens of up to Rs 50,000 per financial year. “This limit must be computed separately for each bank/payor for all deposits made with them. The TDS deduction is unaffected by the payee’s choice of tax regime, according to Sirwalla.
If your income did not exceed the minimum exemption limit and you were unable to submit Form 15H, your bank would have withheld 10% of the interest earned. When filing your tax returns, you can claim a refund for the excess tax deducted.
Premium deduction for health insurance
Under section 80D, a resident senior citizen (age 60 or older) can deduct up to Rs 50,000 per financial year for health insurance premiums paid for himself or his family (all senior citizens). In this context, “family” refers to a spouse and dependent offspring.
In the absence of a health insurance policy, a senior citizen may deduct medical expenses up to Rs 50,000 per financial year for himself or his family.
In addition, according to Sirwalla, a senior citizen is permitted an additional deduction of up to Rs 50,000 per financial year for premium paid (or for medical expenses incurred in the absence of insurance) for senior parents.
In both instances, the deduction can only be claimed if the payment was made via a method other than currency. This deduction is no longer available under the current tax system.
Specific medical expense deduction
Under section 80DDB, a resident senior citizen (60 or older) can claim a deduction for medical expenses incurred for himself or a dependent to treat prescribed diseases or maladies. A senior citizen can claim a maximum annual deduction of Rs 1 lakh under this section. Those under 60 can claim a maximum of Rs 40,000 in deductions.
Sirwalla emphasises that this deduction is available after deducting the amount received from an insurer and/or reimbursed by an employer for such medical treatment. This deduction is no longer available under the current tax system.
The benefit of the deductions under sections 80D and 80DDB is available to all taxpayers, not just those aged 60 or older. For the latter, however, the permitted deduction amount is reduced.
Mohanka clarifies who can claim deductions under these provisions by stating, “Only the person who paid the health insurance premium or incurred the medical expense may claim the deduction.” Therefore, if a senior citizen wishes to claim this deduction, this payment/expense must be made exclusively from his/her bank account.”
Scheme for Senior Citizens’ Savings Deduction
In accordance with section 80C, investments made in the Senior Citizens Savings Scheme (SCSS) are deductible for senior citizens up to an annual limit of Rs 1.5 lakh. This deduction is no longer available under the current tax system.
Therefore, if you are a senior citizen preparing to submit your tax returns, do not forget to claim these deductions where they apply. Ensure you have the necessary documentation to substantiate your claims.
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