The income tax benefits available to resident senior- and very senior-citizens range from higher exemption limit to deductions under various sections on account of medical expenses and interest earned on deposits.
Here is the list of income tax benefits for senior citizens and very senior citizens:
Higher exemption limit
Senior citizens and very senior citizens are granted a higher exemption limit as compared to normal or non-senior citizen tax payers. Exemption limit is the level of income up to which a person is not liable to pay tax to the government.
For FY 2020-21, exemption limit for a senior citizen is ₹3,00,000. The exemption limit for non-senior citizen is ₹2,50,000. An additional benefit of ₹50,000 in the form of higher exemption limit is available to a resident senior citizen as compared to normal tax payers.
A very senior citizen is granted a higher exemption limit of ₹5,00,000.
Exemption from paying advance tax
As per section 208, every person whose estimated tax liability for the year is ₹10,000 or more, shall pay his tax in advance, in the form of 'advance tax'. However, section 207 gives relief from payment of advance tax to a resident senior citizen. As per section 207 a resident senior citizen not having any income from business or profession, is not liable to pay advance tax.
A very senior citizen filing his return of income in Form ITR 1 or ITR 4 can file his return of income in paper mode, i.e., for him electronic filing of ITR 1 or ITR 4 (as the case may be) is not mandatory. However, he may go for e-filing if he wishes.
Deduction on interest income on bank deposits
Interest earned on saving deposits and fixed deposit with banks or post office or co-operative banks for an amount upto ₹50,000 earned by the senior citizen is eligible for deduction under Section 80TTB.
Also, there will be no deduction of tax at source upto ₹50,000. This limit of ₹50,000 has to be computed for every bank individually.
Deduction for payment of medical insurance premium
Medical insurance premium up to ₹50,000 paid in a year by a senior citizen is allowed as a deduction under Section 80D of the Income Tax Act. If the senior citizen is paying medical insurance premiums for his or her parents who are also senior citizens, he or she can claim an additional deduction of up to ₹50,000.
Deduction for medical treatment of specified diseases
As per section 80DDB, a senior citizen taxpayer can claim deduction of up to ₹1,00,000 for expenditure incurred by him on medical treatment of specified diseases.
