AY 2020-21 (FY 2019-20) tax season is here for the taxpayers in India, its vital to understand the tax savings offered in Indian Budget 2018 that continued to benefit even today and act accordingly to maximize the Tax Savings. Let’s take a look at what are the tax benefits offered to Senior Citizens in India?
For ordinary individual taxpayers the basic exemption limit, up to which one is not required to pay any tax is set @ Rs. 2.5 Lakhs for AY 2019-20 and is continued for AY 2020-21 also. For Senior citizens, the basic exemption limit is set @ Rs. 3 Lakhs. This means, Senior citizens who are aged @ 80 years or more, do not have to pay any tax up to Rs. 5 Lakhs annual income.
A new standard deduction for Senior Citizens was introduced and is set at Rs. 40,000. While individual allowances related to transport is at Rs. 1600 per month (a total 19,200 per year), and reimbursement of medical expenses is at Rs. 15,000, a total of all individual allowances stands at Rs. 34,200. But it is wise to take a standard deduction of Rs. 40,000 without any hassles in showing proofs etc.
Another good news for persons who satisfy all of the below conditions, to avoid paying advance tax
As a Senior Citizen you may submit the Form 15H, to the deductor for non-deduction of TDS (Tax Deducted at Source) on certain incomes (such as bank Fixed deposits, or term deposits), if your total estimated taxable income is zero for the financial year.
As a Senior Citizen aged 80 years or more, and filing ITR-1 or ITR-4 and having total income more than 5 Lakhs, or having an expected tax refund, you may file your income tax return manually i.e., through paper mode. For such scenarios, eFiling Online is not mandatory but one may choose to do so at your convenience.
Another welcoming move is on deduction of interest income. Deduction of interest income received on deposits with banks & post offices was increased from Rs. 10,000 to Rs. 50,000 for senior citizen, u/s 80TTB.
Please remember, if a senior citizen claims 80TTB then the taxpayer will not be allowed to claim the benefits of section 80TTA.
To reduce the burden of TDS process u/s 194A for senior citizens, it was amended to disallow banks from deducting tax from payment of interest up to Rs. 50,000.
An increased in deduction limit for health insurance premium and/ or medical expenditure from Rs. 30,000 to Rs. 50,000 under section 80D for senior citizens is a welcoming move.
This benefit will also be extended to the assessee who are paying the premium on behalf of their parents aged at 60 years and above.
In case of specific critical illnesses, senior citizens are now allowed to claim a tax deduction of Rs. 1 Lakh for medical expenditure u/s 80DDB. Which is an increase from earlier deduction limit of Rs. 60,000 for senior citizens & Rs. 80,000 for very senior citizens.
While this is applicable for all taxpayers, Senior Citizens can also get the exemption of Rs. 20 Lakh from earlier limit of Rs. 10 Lakh. This benefit is applicable for taxpayers, who receive gratuity on or after 1st April 2018.
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