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Income tax benefits for senior citizens

Income tax act has provided quite a few benefits to senior citizens to help them wade through their old age. Let us see how.

Balwant Jain

15 Jun 2010

It is often said that the true character of a society is judged by how it treats its elders. The senior citizens of a country need to be taken care of by the society in general and by their children in particular.


Now a days lot of benefits have been granted to senior citizens in India so that they can live a fulfilled life. These are available in the form of special saving schemes, pension schemes, postal schemes, mediclaim policies and the likes which I have already written about in my earlier columns.


In this piece I would like to dwell on the income tax benefits available to senior citizens.

As described under Income tax Act, a senior citizen is a person who was of 65 or above of age during the year. It is worth mentioning that Income tax act contains many beneficial provisions for senior citizens. So what are these? Let's understand.


Firstly senior citizens do not have to pay any income tax upto the income limit of Rs. 2,40,000 as against limit of Rs. 1,60,000 applicable for ordinary individual.


As a senior citizen you can claim deduction of upto Rs. 100,000 each year under Section 80C, in respect of money deposits made under Senior Citizens saving scheme rules, 2004. This provision is significant when other avenues for claiming tax deductions under Section 80 C like life insurance premium, payment towards pension plan, contribution to PPF account, ULIP etc. are no longer remain attractive to senior citizens. Though for income tax purpose you are a senior citizen if you have completed 65 years of age, however for the purpose of depositing money under the senior citizen scheme, the age limit is only 60 years and not 65. This age limit is relaxed to 55 years in case you have taken VRS and the retirement money is invested within a period of three months in the scheme. The rate of interest under this scheme is 9% currently which is higher than on any other risk-free investment avenue available today and that too with tax deduction.


The general deduction in respect of insurance premium for health insurance popularly known as mediclaim is Rs. 15,000 for a family. However if premium is paid for senior citizen, the amount of deduction available goes up to Rs. 20,000. In case the premium is paid for the parent who is a senior citizen, the person paying the premium can claim a separate deduction of Rs. 20,000 in addition to claim of Rs. 15,000 in respect of premium paid for self, spouse and children. In case of the person paying the premium, as well as his parents who are senior citizens, the deduction available for each category will be up to Rs. 20,000 each.


The income tax also allows deduction for expenditures actually incurred for treatment of family members in respect of some specified diseases. Section 80DDB allows a deduction of Rs. 40,000 for treatment of self, spouse, siblings, parents, and children upto Rs. 40,000 for expenditure incurred for treatment of specified disease. However this deduction goes up to Rs. 60,000 in case the person to be treated is a senior citizen.


Senior citizens can submit Form no. 15H for no deduction of tax at source to the payer of money like interest, withdrawals from NSS account, and income from units of mutual funds and total tax liability is nil for the year in question.


As a senior citizen if you are not engaged in any business or profession, you will not be required to file a return of Income even if you fall into the criteria on ownership/occupation of immovable property or subscription of a telephone under the popularly known as one by six scheme. However, you will have to file a return of income under the scheme if you fulfill any of the other four criteria.  This exemption is available only if the senior citizen does not have any taxable income.


This way we find that Income tax act has provided quite a few benefits to senior citizens to help them wade through their old age, by way of higher benefit for Mediclaim when the medical cost constitute a significant portion of their budget.


The Income tax Act also treats the senior citizens fairly when it allows them to provide benefit of investing in senior citizen saving scheme at a higher rate of interest and at the same time let them claim the same as deduction under Section 80C.