CloudFare image
Support support image
Name is required.
Please enter valid Name.
Email ID is required.
Please enter valid Email.
Phone Number is required.
Please enter valid Phone Number.
Message is required.
Submit

Faster, easier and secure gateway to e-file income tax return

Heading IncomeTax icon

Tax benefits for Income Earned by Senior Citizens in India

The source of Income for senior citizens includes rental income, fixed deposits, pension, interest on savings, and income from various schemes like post office scheme, senior citizen saving scheme etc. For the assessment year 2015-16, the exemption limit has been increased from Rs. 2, 50,000 to Rs. 3, 00,000. Under section 80D and section 80DDB, senior citizens can avail deductions of Rs. 30,000 on their health insurance premium and Rs. 60,000 to Rs. 80,000 for medical treatment respectively.

As per the Indian Income Tax Act, there are two categories of senior citizens:

  • Senior citizens: Those who are above the age of 60 and less than 80.
  • Super senior citizens: Those who are above the age of 80.

Under section 80L, senior citizens can avail an exemption on interest of up to Rs. 12,000. The gift items given by senior citizen are exempted from tax. Senior citizens having Public Provident Funds can avail an exemption of up to Rs. 1, 50, 000 for the assessment year 2015-16.

Slab for Senior and Super Senior Citizens

Income tax slab rate for senior citizens (above 60 and less than 80) for the financial year 2017-18.

Income Slab Tax Rate
Income up to Rs. 3,00,000 No Tax
Rs. 3,00,000- 5,00,000 5%
Rs. 5,00,000- 10,00,000 20%
Above Rs. 10,00,000 30%

Surcharge:

  • 10% of Income Tax for individuals whose total income is above Rs. 50 Lakhs but below Rs. 1 crore.
  • 15% of Income Tax for individuals whose total income exceeds Rs. 1 Crore.

Cess:

3% of total income tax and surcharge calculated.

Income tax slab rate for super senior citizens (above 80 years) For the financial year 2017- 18

Income Tax Slab Tax Rate
Income up to Rs. 5,00,000 No Tax
Rs. 5,00,000- 10,00,000 20%
Above Rs. 10,00,000 30%

Surcharge:

  • 15% of Income Tax for individuals whose total income exceeds Rs. 1 Crore.

Cess:

3% of total income tax and surcharge calculated

Rebate to senior citizens is provided under section 87A. It is given to only those individuals whose total income is less than Rs. 5 Lakhs annually. A rebate of Rs. 2,000 is given to the citizens whose total income is less than Rs. 5, 00,000. Hence, the payable tax amount after getting rebate will be Rs. 23,000.

Deductions Available for Senior Citizens

There are various deductions available for senior and super senior citizens under various sections.

Deductions allowed are as follows:

  • Deduction under Section 80D: Deduction allowed under this section is for the payment of medical insurance premium. Deduction limit is Rs. 30,000. An additional deduction of Rs. 5,000 is allowed for the expenses incurred on the health check-ups under section 80D of the Income Tax Act, 1961.
  • As per Finance Act, 2012 senior citizens who do not have any business income are not required to pay any Advance Tax, they are only required to pay Self Assessment Tax on their Total income.
  • Non-deduction of Tax Deducted at Source (TDS) on Interest Income: Incase the total income of senior citizen is exempted from being imposed with Income tax and no tax is payable by him/her for that financial year, then he can avail deduction of Tax Deducted at Source (TDS) on the interest on fixed deposits by submitting Form 15H.
  • Deduction under section 80DDB: Under this section, the deduction is available for the ailment of a specific disease. Under this section, the deduction is available for up to Rs. 40,000 and if the patient is a senior citizen then the deduction allowed is Rs. 60,000. From assessment year this deduction has been increased to Rs. 80,000 for the super senior citizen.
  • No tax on sum received under Reverse Mortgage Scheme: Reverse Mortgage Scheme is the opposite of conventional home loan. In a home loan, an individual is required to pay EMI’s to the bank at regular intervals and after paying all the EMI’s the house is subsequently owned by the individual. But, under the Reverse Mortgage Scheme regular payment is made to Senior Citizens by mortgaging their house. And under this scheme, the ownership remains with the senior citizen only. The amount paid to the Senior Citizens is fully exempted from tax.

E-filing for Super Senior Citizens

For super senior citizens, e-filing is not mandatory as they may not be comfortable with the modern-day technology. Income Tax department has granted a relaxation for all taxpayers who fall in the category of super senior citizens. Anyone who qualifies as a senior citizen does not necessarily need to use the e-filing mode to opt for refund claim; he/she can make the request in a paper format.

Filing of Tax for Senior Citizens

The following ITR forms are required to be filed by the senior citizens.

  • ITR-1: For those individuals whose source of income are from
    • Salary or Pension.
    • Income from one House property.
    • Income from other sources (excluding income from horse racing and winning the lottery).
  • ITR-2: For those individuals whose income are from
    • Salary or Pension.
    • Income from house property.
    • Income from capital gains.
    • Income from other sources (excluding income from horse racing and winning the lottery).
    • When the income of another individual such as a spouse or another member must be combined with the income of the Assessee.

Tax Saving Scheme, Senior Citizen Saving Scheme (SCSS)

A senior citizen can invest in various tax saving scheme like Senior Citizen Saving Scheme (SCSS), Post Office Monthly Income Scheme etc. Under this scheme, only individuals aged above 60 can invest into it. This scheme offers capital protection along with quarterly interest payment as a source of Income. Employees who take retirement before 60 and who either opted for Voluntary Retirement Scheme (VRS) or superannuation can also invest under this scheme, provided the investment is done within the month of receiving retirement benefits.

The scheme currently offers an interest rate of 8.5% per annum. This scheme doesn’t offer the benefit of cumulative interest, as offered in Bank Fixed deposits (FD’s). The tenure of this scheme is 5 years, but it can be further extended for three more years. Premature withdrawals are allowed, but only after one year, with some premature charge.

Non-Resident Indians (NRI’s) and Hindu Undivided Families (HUF’s) are not allowed to invest under this scheme. Retired Defence personnel, except civilian defense personnel, can invest in this scheme subjected to the various conditions, irrespective of their ages.

Procedure to Invest

A senior citizen can invest under this scheme by opening an Individual Account, a Joint Account with his/her spouse, with a post office or a scheduled commercial bank. There is no limit for opening the bank accounts, but the total amount of all the accounts must not breach the maximum limits.

Limit of Investment

An individual can open a Senior Citizen Saving Scheme (SCSS) account by investing up to Rs. 15 Lakhs. The amount invested under this scheme cannot exceed the amount received on the retirement. So, an individual can invest either Rs. 15 Lakhs or the amount received on retirement, whichever is less. As per the rules of Saving Scheme, SCSS account can be opened by cash for an amount below Rs. 1 Lakh. For above Rs. 1 Lakh a citizen needs to deposit the amount by cheque. The investment date under the scheme is taken as on the date of which cheque is realized in the government’s account.

Documents that need to be submitted

Following is the list of documents required to invest in Senior Citizen Saving Scheme (SCSS):

  • Filled application form, available at the post office or bank.
  • Know Your Customer (KYC) form.
  • Photograph of the citizen applying.
  • Permanent Account Number (PAN) of the citizen.
  • Address proof.
  • Age proof.
  • Proof of date of disbursal of the retirement benefits.

PAN is mandatory at the time of opening an SCSS account and if the individual doesn’t have a PAN at the time of opening an account then he needs to first apply for PAN card.After the opening of the account, the depositor is given the passbook, which includes the date of opening, account number, depositor’s name, address, the amount deposited, dates and amount of the quarterly interest payable, maturity date and nomination details.

Maturity

If the depositor wishes to close the account after the completion of 5 years and want to get the accumulated amount in the SCSS account then he needs to submit the passbook along with a duly filled “Closure Form”. For extension of the scheme for another three years (after completion of five years), the investor must submit the duly filled form of the extension of the scheme.

The interest received under this scheme is taxable in the hands of depositors. As per the current tax laws, if the interest received is more than Rs. 10 000 then it is taxable.