ITR Filing: Exemptions and deductions that senior citizens can claim for FY24

ITR Filing: Exemptions and deductions that senior citizens can claim for FY24

Introduction

After retiring from a long career, many seniors cherish the freedom to pursue their interests, spend time with family, or simply break away from routine. However, it’s essential to understand income tax laws still apply. Senior citizens, like everyone else, are responsible for paying taxes on their earnings.

For retirees, there are special deductions designed to reduce their tax burden. These deductions recognize their years of work and help manage finances better during retirement. Knowing about these benefits can make a big difference in how retirees handle taxes. Through this blog let us understand this

Income Tax Slab For Senior Citizen & Super Senior Citizen FY 2023-24 (AY 2024-25)

According to the Income-tax Act, 1961, a senior citizen is defined as an individual aged 60 years or more but less than 80 years, while a super senior citizen is one who is 80 years or older. This article provides an overview of the income tax provisions applicable to resident senior citizens and super senior citizens.

Under the Income Tax Act, resident individuals are categorized into three groups:

• Individuals up to 60 years of age
• Senior citizens – Individuals aged between 60 and 80 years
• Super senior citizens – Individuals over 80 years of aged

Income Tax Slab For Senior Citizen

If an Individual is paying tax under the new tax regime, concessional tax rates are prescribed under section 115BAC with conditions to claim exemptions, deductions and losses. However, under the old tax regime, senior citizen individuals can enjoy unconditional claim of exemptions and deductions.

As per old tax regime, the income tax slab rates for senior citizen for FY 2023-24 (AY 2024-25) are as follows-

Income Tax Slab For Super Senior Citizen

Income Tax Slab Rate As Per New Tax Regime For Senior And Super Senior Citizen 

Sources of Income for Senior and Super Senior Citizens

Senior and super senior citizens typically generate income from a variety of sources tailored to their financial needs and lifestyle. These include:

• Pension: Regular payments received after retirement from government or private sector employment.
• Interest on Savings: Income from savings accounts, fixed deposits, and other interest-bearing investments.
• Rental Income: Earnings from renting out properties owned by them, providing a steady rental yield.
• Capital Gains: Profits realized from the sale of assets such as stocks, bonds, or real estate.
• Senior Citizen Saving Schemes: Specialized savings instruments offering attractive interest rates and benefits designed specifically for seniors.
• Reverse Mortgage Schemes: Financial arrangements where homeowners receive regular payments from a lender against the equity in their homes.
• Post Office Deposit Schemes: Government-backed savings plans that provide secure returns through various deposit options.

These sources collectively ensure a stable income stream for senior and super senior citizens, supporting their financial independence and wellbeing during retirement.

Benefits to be Forgone by the Senior and Super Senior Citizen in Case they Avail the Benefit Of New Tax Regime

• Benefit of higher income exemption limit of Rs. 3,00,000 and Rs. 5,00,000
• Leave Travel Allowance
• House Rent Allowance (HRA)
• Conveyance Allowance
• Children Education Allowance
• Daily expenses in the course of employment
• Relocation allowance
• Helper allowance
• Other special allowances
• Professional tax and Entertainment allowance
• Interest on housing loan (Section 24) on self-occupied property
• Deduction under Chapter VI-A such as 80C, 80D, 80E, 80TTB, etc. However, they can avail deduction under Section 80CCD(2) i.e. employer contribution to NPS, 80CCH contribution to Agniveer fund and 80JJAA i.e. deduction for employment of new employees

Benefits Available To The Senior And Super Senior Citizen

1. The elementary exemption benefit

• Every individual in India, who falls under the income bracket to pay tax, is allowed some elementary waivers.
• For senior citizens, the government has increased this basic exemption limit up to ₹3 lakhs under both tax regimes, effective April 1, 2023.
• Super citizens get a higher advantage, considering their income and age. For them, this waiver is of up to ₹5 lakhs under the old tax regime in one financial year. Under the new regime, however, the basic exemption limit is up to ₹3 lakhs.
• Other than the senior or super citizens, this exemption for ordinary citizens is up to ₹2,50,000/- only under the old tax regime, which leads them to pay more taxes.

2. Benefits under medical insurance

Under section 80D, senior citizens are offered a benefit on account of payment of the health insurance premium up to ₹50,000. Super senior citizens who are not medically insured can also enjoy this benefit.

For super citizens, under section 80D, the deduction for the payment of medical premium as well as the actual expenses incurred on their treatment are allowed.

Mode of Payment under Section 80D
Here are the payment modes allowed to avail the tax deduction under section 80D:

3. Privilege on interest income

Senior citizens who are residents of India will have to pay no tax on their interest earned up to ₹50,000 in a financial year.

Applicable under section 80TTB of Income Tax, this will consider interest earned in the savings bank account, deposits in a bank, and/or deposits in the post-office. When filing their Income Tax Return, senior citizens must fill the form 15H.

Also, Section 194A provides senior citizens with the benefit of a higher TDS deduction on interest payments of up to ₹ 50,000 by the bank, post office or cooperative bank. This limit is ₹ 40,000 for non-senior citizens.

4. Exemption from filing ITR

Budget 2021 introduced a Section 194P, under which senior citizens aged 75 and above are exempted from filing the ITR if they fulfil the following criteria:

They have income only from their pension.

They receive income from interest and pension in the same bank account.

They have furnished a declaration form 12BBA to the specified bank.

5. No advance tax

While individuals below the age of 60 have to pay an advance tax if their tax liability is ₹10,000 or more in a financial year, senior citizens are free from this burden unless they make income from business or profession.

6. Allowance for the treatment of specified diseases

The Indian government allows individual taxpayers and dependent relatives below the age of 60 not to pay tax if medical treatment costs close to ₹40,000.

For dependent senior and super senior citizens, this deduction limit is up to ₹1 lakh if they undertake any treatment for a specified disease/critical illness in a financial year, as per Section 80DDB of the Income Tax Act.

7. Income Tax Return benefits

Super Senior Citizens (individuals above 80 years) can file for their Income Tax Returns through either Sahaj (ITR 1) or Sugam (ITR 4). They can choose to do it either manually or electronically
.
8. No tax under the Reverse Mortgage Scheme

Senior citizens may reverse mortgage on any of their accommodations to make monthly earnings. The ownership of the property remains with the senior citizen, and they are given monthly payments for it. The amount paid in instalments to the owner is exempted from Income Tax.

9. Standard deductions from pension income

Senior citizens are allowed a standard deduction of ₹50,000 for their pension income, including family pensioners who can avail of deduction benefits up to Rs 15,000.

10. Higher deduction in respect of expenses incurred for treatment of specified diseases or ailment

They can claim a flat deduction of Rs. 1,00,000 in respect of medical expenses incurred for specified diseases of self or dependent senior citizen relatives as specified in the Act under Section 80DDB.

11 Deduction on investment in Senior Citizens Savings Scheme

Senior citizens over 60 years of age can invest in the Senior Citizens Savings Scheme and save tax by claiming a deduction up to Rs. 1,50,000 under Section 80C under the old tax regime. This scheme also ensures regular as well as higher interest payouts. The same deduction cannot be claimed under the new tax regime.

Deduction under section 80c

• 5 year fixed deposits
• Investment in Equity Linked Savings Scheme (ELSS)
• Investment in Public Provident Fund (PPF)
• Life insurance premiums (LIP) paid
• Investment in Senior Citizen Saving Scheme (SCSS) or
• National Saving Certificates etc.

Conclusion

Filing an income tax return is an important way to declare your total income and contribute to the nation’s development. It helps the government fund infrastructure and essential services such as healthcare and defense. Meeting all tax obligations before the due date is crucial to avoid penalties and legal consequences. Additionally, filing an income tax return holds significant legal value as it is an official record with the government.