Indian Senior citizens enjoy special treatment and concession in various fields like train tickets, medical expenses and so on. Likewise, the Income Tax Act, 1961 gives special treatment to senior citizens by providing various income tax benefits in order to reduce financial and income-tax compliances burden.
Moreover, the Indian government has always concentrated on easing-off the financial burden of senior citizens and to ensure the hassle-free ITR process. This has been reflected in every year’s budget proposals.
In this blog we will discuss the meaning and the various income-tax benefits given to senior citizens under I-T Act, 1961, specifically by Budget 2021.
Who is Senior Citizen under the I-T Act, 1961?
Before understanding the tax benefits available to senior citizens let’s first understand who is senior citizen for income tax purposes.
The Income Tax Act, 1961 has further categorized “senior citizens” into 2 categories for income tax purposes, discussed as under-
- Senior Citizens– are those citizens who have attained/completed the age above 60 years but are below 80 years of ageduring the Financial Year under consideration.
- Super Senior Citizens– are those citizens who have attained/completed the ageof80 years or morewithin the Financial Year under consideration.
Income-Tax benefits available to Senior Citizens under I-T Act, 1961
Exemption from filing ITR
The Section 139 of I-T Act, 1961 mandates the filing of ITR for every individuals whose gross income exceeds the basic exemption limit in a relevant Financial Year.
However, The Ministry of Finance in budget 2021 announced the most eminent and compelling relief to Super Senior Citizens above 75 years of age from the mandate of filing ITR as per section 139of the IT Act. Accordingly, it introduced Section 194Pof the IT Act in order to provide relief from ITR filing compliance burden to Super Senior Citizens.
Thus, the Section 194P of the IT Act, exempts the senior citizens from filing ITR in a financial year upon satisfaction of following conditions –
- Super Senior citizen shall be a ‘Resident of India’ in the previous year as per the I-T Act
- He shall be either of 75 years or more
- He shall have income arising in the form of either pension and/or interest income Moreover, He must be receiving both income from the same specified bank.
- He shall submit a declaration containing these details before the specified authorities within due time.
- Specified Bank shall be the bank specified or notified by the Central Government for this purpose.
Higher Exemption Limit in Income-Tax slabs
The Income Tax Act provides higher income tax exemption limit for senior and super senior citizen taxpayers as compared to other regular taxpayers and non-senior citizen taxpayers.
Like for Financial Year 2020-2021, the Income-tax exemption limit for non-senior and regular taxpayers is Rs. 2,50,000/- whereas the exemption limit for senior citizen is Rs.3,00,00/- and for super senior citizen taxpayers is Rs. 5,00,000.
Advance tax exemption – Section 208
Section 208 of the Income Tax Act, 1961, mandates every taxpayer whose estimated/approximate tax-liability for the relevant financial year is Rs. 10,000 or more to pay tax in advance, known as advance tax.
However, Section 207 of the IT Act relieves the senior citizens and super senior citizens taxpayers from the burden of payment of advance tax. It states that the senior citizen or super senior citizen not having any income from business/profession shall not be liable to pay any advance tax.
Thus, the interests payable for non-payment of advance tax or periodic instalments related to advance tax under Sections 234B and 234C of the I-T Act respectively shall also not be applicable on senior and super senior citizens.
ITR filing in paper mode (i.e. Offline)
Every taxpayer must be knowing that he is bound to file his Income Tax Return electronically through the income tax portal. However, the government has put special relaxation for super senior citizens as they are not that tech-savvy. Thus, the super senior citizens are allowed to file his ITR Form 1 or 4 in paper-mode also. Hence, they can file their ITR-1 and ITR-4 both in offline and online mode.
Income-Tax benefits on interest earned on bank deposits
The I-T Act provides higher deduction on interest income earned on bank deposits for senior citizens under Section 80TTB of the Act. According to this section, both senior citizens and super senior citizens are allowed to claim deduction up-to Rs. 50,000/- on the interest income accrued/earned on deposits in both saving and fixed account with banks, co-operative banks and post offices.
Same type of deduction is also available for other Individuals (resident or non-resident) and HUF but it is allowed only up-to Rs.10,000/- under Section 80TTA.
Furthermore, as per the provisions of Section 194A of the IT Act, Banks, post offices and co-operative banks are required to deducted tax at source if amount of aggregate payment of interest in a year is more than Rs 40,000. However, in case of senior citizens provisions of TDS apply only if aggregate interest payment is more than Rs. 50,000in a year.
Income-Tax benefits for paying Medical Insurance premium
Section 80D of the I-T Act allows every senior and super senior citizens to claim deduction on the medical insurance premium paid up-to Rs.50,000 in financial year. To other individuals this deduction is available only upto Rs. 25,000 in a financial year.
Income-Tax benefits on Medical Services
Section 80DDB of the I-T Act, allows every senior and super senior citizens to claim deduction up-to Rs.1,00,000 on all the expenses incurred for availing specified medical services and for the treatment of specified diseases ina financial year.To other individuals this deduction is available only upto Rs.40,000 in a financial year
Pension Income as Standard Deduction
Senior and Super Senior Citizens are allowed to claim a standard deduction up-to Rs 50,000 on account of their pension income in a financial year.
The I-T Act has followed the Right to equality which states that like should be treated alike and unlike should be otherwise. The I-T act has categorized the Senior Citizens on the basis of age to provide income tax benefits likewise. These benefits relieve the senior citizens from the tax liability and other related compliances burden, up to certain limit.