With the introduction of the new income tax returns filing regime, most benefits and deductions were taken away as the government intended to give citizens a standardised structure. This meant that largely most deductions that were available earlier would no longer be provided.
However, senior citizens need not worry. They still have the option to opt for the old regime, which provides most of the benefits and deductions. In other words, they have the option to choose between the old regime and the new one and cash in on beneficial slab rates. In addition to this, they could claim deductions for medical expenses incurred during the year and, at the same time, claim deductions for the mediclaim amount paid to insurance companies in the eventuality of hospitalisation.
Also Read- ITR Filing: Neglecting THIS step may cost you income tax refund
Nitin Baijal from Deloitte Haskins & Sells LLP, said, “The old regime still continues to offer a range of benefits to senior citizens starting with beneficial slab rates and deductions such as medical expenses, mediclaim and interest earned on fixed deposits.”
Who is a senior citizen? The Indian government considers individuals aged 60 and above as senior citizens. But the benefits only apply if the individual is a resident of India. Senior citizens can avail of these tax benefits such as advance tax payments, standard deductions, deductions for medical insurance premiums, deductions for interest earned from banks and post offices, and more, under the old tax regime.
This piece explores various ways people aged 60 or above can maximise income tax deductions while filing their income tax returns (ITR).
Also Read– Can You Re-file Income Tax Return? Know What Is ITR-U and How To File It
1. Senior citizen tax slab
Under the IT rules, senior citizens are eligible for a higher basic tax exemption limit than regular taxpayers. Amit Gupta, Managing Director at SAG Infotech, said, “For individuals aged 60 to 80 years, the basic exemption limit is Rs. 3,00,000 (for the financial year 2022-23), while for people below the age of 60, this limit is Rs. 2,50,000. Senior citizens can reduce their taxable income by utilising this higher exemption limit and save money when filing ITR.”
2. Deductions under Section 80C
Senior citizens can claim deductions under Section 80C for various investments and expenses. This income tax rule allows a deduction of up to Rs 1.5 lakh from the total taxable income. Senior citizens can invest in options such as Public Provident Fund (PPF), National Savings Certificates (NSC), Senior Citizen Savings Scheme (SCSS), and life insurance premiums to reduce their tax liability under Section 80C.
Read More: How is Form 16 different from Form 16A? How are they used while filing ITRs?
3. Health insurance premium
Senior citizens usually have higher medical expenses than younger people. They can purchase medical insurance policies to claim deductions under Section 80D. Senior citizens can claim a deduction of up to Rs 50,000 for health insurance premiums paid for themselves or their spouse, dependent children, parents, etc.
Additionally, people aged 60 years or above can also claim a deduction of up to Rs 50,000 for healthcare expenses, such as medical treatment of their own or their spouse. This is in addition to the medical insurance deduction.
Read More: Income Tax Return (ITR) Filing Deadlines FY 2023-24: A Quick Guide for Different Taxpayers
4. Deduction for medical treatment of specified diseases
Senior citizens can claim deductions of up to Rs 1 lakh under Section 80DDB for expenses incurred on the treatment of specified diseases for themselves or their spouse and other dependents. “This deduction can be claimed for specific diseases, including cancer, Parkinson’s disease, chronic renal failure, dementia, and others,” said Gupta.
5. Take a reverse mortgage plan
“Senior citizens who own a residential property in their name can use it to generate a source of income by using a reverse mortgage scheme, under which they can receive a regular stream of income by mortgaging their property. It can also help you save tax, as the income from a reverse mortgage is not taxable,” Gupta said. “Managing your finances, including your tax liability after retirement or when you’re old (above 60 years) is as important as ever. The above income tax deductions can offer a significant advantage by allowing you to reduce your tax liability to enhance your financial well-being. Make sure to consult a certified financial planner or tax professional to get the maximum out of the deductions available under various sections of the Income Tax Act when filing your ITR (income tax return).”
Read More: Income Tax Return: How to get maximum tax refunds on filing ITR | Check out these 5 ways!
Thus, senior citizens in India can benefit from various tax breaks, including increased exemption limits, deductions for medical insurance payments, and interest income exemptions. They must comprehend these rules and use them to optimise their tax planning, ensuring they receive the proper tax benefits.
