A senior citizen is an individual resident between the age group of 60 to 80 years, as on the last day of the previous year. This means as per the current year, a person born on or after April 1st, 1935 and before April 1st, 1955 is a senior citizen. The sources of income for senior citizens include pension, rental income, interest on savings, fixed deposits, senior citizen saving scheme, reverse mortgage and post office scheme. As decided by the Central Board of Direct Taxes directive, cases of senior citizens cannot be scrutinized, unless an assessment is required based on credible information.
According to the Union Budget announced on 1st February 2018, three vital provisions for tax deductions have been introduced to enable the senior citizens of India to lead a prosperous and dignified life. For aged people, health is a major area of concern due to frequent unexpected illnesses. Hence, they are prone to frequent hospitalizations and the high cost incurred on medical expenses. To deal with this situation, the government has offered the following tax benefits for the senior people:
Under section 80D, senior persons between the ages of 60-80 years can claim tax deductions of up to Rs. 50,000 on health insurance and medical expenses. To offer this tax benefit to aged people, the limit of deduction has been revised from Rs. 30,000 to Rs. 50,000 in the new Union Budget. As this new rule has been introduced, each and every senior citizen of India can now take benefit of up to Rs. 50,000 tax deduction every year on health insurance premium.
Also, under Section 194A, deduction of the interest income on deposits with banks and post offices has been increased to Rs. 50,000 from Rs. 10,000 for senior citizens. TDS is not deducted on this type of income. Senior citizens can also avail this benefit for interest income on their fixed deposit schemes and recurring deposit schemes.
In case of specific critical illnesses, senior citizens are now allowed to claim a tax deduction of Rs.1 lakh for medical expenditure under section 80DDB. The earlier deduction limits of Rs. 60,000 for senior citizens and Rs. 80,000 for very senior citizens has now been revised to Rs.1 lakh by the government in this fiscal to offer a better and secure life to the aged people of the country.
The following table depicts the tax slab for senior citizens as per the year FY 2018-19.
| Annual Income Slabs | Rates |
|---|---|
| Less than Rs. 3 Lakhs | No Tax rate applicable |
| More than Rs. 3 Lakhs but less than Rs. 5 Lakhs | 5%* |
| More than Rs. 5 Lakhs but less than Rs. 10 Lakhs | 20% |
| More than Rs. 10 Lakhs | 30% |
*Rebate under Section 87A is applicable if the income is not above Rs. 5 lakh. A rebate of Rs. 2,000 will be applicable for those with an annual income up to Rs. 5 lakh. Hence, the Tax payable will be Rs. 23,000. For those individuals who have an income above Rs. 5 lakh, the tax payable will be Rs. 25,000 + 20% tax. The education cess has changed to 4%. A surcharge of 15% will be payable for the financial year 2018-19 provided the income is above Rs.1 crore.
The income tax calculated for senior citizens is based on their basic salary, house rent allowance, fixed allowances, and any other sources of income. However, senior citizens in India receive higher exemption limit compared to individuals who are below 60 years old. All the income is taken into consideration along with the allowable deductions and the income tax slab for FY 2018 – 2019, so as to calculate the income tax for a senior citizen. There are a number of websites that offer an online income tax calculator. Once you have all the relevant details, you must use the calculator to determine a senior citizen’s taxable income.
As compared to non-senior citizens, a senior citizen receives superior benefits in India.
A senior citizen is entitled to a deduction of the medical insurance premium of up to Rs. 50,000. These citizens are also exempted from the payment of advanced tax.
Also for senior citizens, there are no deductions of TDS on earned interest.
Section 80DDB provides a higher deduction for the ailment of specified diseases.
Senior citizens are also not required to pay tax for the amount received under Reversed Mortgage Scheme.
It is mandatory for senior citizens to file their income tax return, so as to claim their tax refund. The following Income Tax Return (ITR) forms are required to be filled by the senior citizens to do so:
ITR I – Individual whose total income is inclusive of:
Salary or pension
Income from house or property (excluding incidents where loss is brought forward from previous financial years)
Income from the other sources (excluding income from horse racing or winning lottery)
ITR 2 - Individual whose total Income is inclusive of:
Salary or pension
Income from the other sources (includes winning from horse racing and lottery)
Incidents where the income of another individual, such as spouse or other member has to be combined with the income of the individual
The basic exemption limit for Senior citizens who are aged between 60 to 80 years is Rs. 3 lakhs. Senior citizens can avail a plethora of benefits in terms of interest earned on savings schemes. Most banks provide a higher interest rate to senior citizens in comparison to the rest. On fixed deposits, tax is deducted at source, and hence, makes it a tax-free investment option for senior citizens. Senior citizens can also avail of exemptions on penalties or are charged a meagre sum, if they opt for a premature withdrawal of fixed deposits for dealing with medical emergencies.
There is another set of individuals known as super senior citizens. A super senior citizen is a resident individual who is 80 years old during the previous year (born before April 1st, 1935). The basic exemption limit for super senior citizens, who are 80 years and above, is Rs. 5 lakhs. Super senior citizens can avail of deductions up to Rs. 50,000 for their medical expenses from their total income. The following table depicts the income tax slabs and rates applicable for super senior citizens for the assessment year 2019-20 (income earned from April 1st 2018 to March 31st 2019)
| Income | Rates |
|---|---|
| Below Rs. 5 Lakhs | Not applicable |
| From Rs. 5 Lakhs to Rs. 10 Lakhs | 20% |
| Above Rs. 10 Lakhs | 30% |
*Surcharge of 15% is applicable where income exceeds Rs. 1 crore, subject to marginal relief.
Who is considered a senior citizen in India?
Individual residents who are above the age of 60 years but under 80 years of age are considered as senior citizens for accounting purposes.
Who is considered as a super senior citizen in India?
Individual residents who are above the age of 80 years are considered as super senior citizens.
What are the tax rates applicable to senior citizens and super senior citizens?
There is a very small difference between the tax rates applicable to senior citizens and super senior citizens. While the minimum exemption limit for those who fall in the senior citizens category is Rs.3 Lakhs, those who are qualified as senior citizens and have an income under Rs.5 Lakhs are exempt from paying tax. Apart from this, the slabs remain the same for both groups.
Are there any special benefits for senior citizens?
Senior citizens, apart from availing the benefit of a higher exemption limit, can also claim tax benefits under Section 80C, Section 80D and Section 80DDB of the Income Tax Act.
Which form must a senior citizen use to file income tax returns?
If a senior citizen earns a salary or pension income, or income from your residential property, or income from other sources, then they can use ITR-1. In case their income includes salary or income from pension, or income from residential property, or income from short/long term capital gains, or income from other sources, then he/she will have to use ITR-2.
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