Senior citizens: Strike a balance between tax saving, liquidity

They must also maximise the utilisation of the higher deductions available to them

The government offers several benefits to senior (60-80 years of age) and very senior citizens (above 80 years) in the matter of income-tax (I-T). Such benefits come either in the form of enhanced deductions or relaxations in tax-filing procedures.

Senior citizens need to strike a proper balance between their tax and financial planning. Suresh Surana, founder, RSM India, says, “They should make tax-saving investments after taking into consideration their liquidity needs, the lock-in period of an investment, their requirement of funds for medical and other emergencies, etc.”

Higher basic exemption limit: Senior citizens’ income of up to ~3 lakh is tax-exempt. Says Vivek Jalan, partner, Tax Connect Advisory Services LLP: “They also get a deduction of ~1.5 lakh under Section 80C and ~50,000 on health insurance. A senior citizen who plans things well does not have to pay any tax if his/her income is up to ~5 lakh.”

Sections 80C and 80D: Senior citizens, too, get a deduction of ~1.5 lakh under Section 80C on instruments like insurance, notified mutual funds, National Savings Certificate, tax-saver fixed deposits (FDS), etc. Jalan says, “When senior citizens opt for the five-year FD, they can also avail of a higher interest rate.” They usually get a higher interest rate of up to 50 basis points on FDS.

Senior citizens are also entitled to a higher deduction on health insurance premium. Kapil Rana, founder and chairman, Hostbooks, says, “Senior citizens can claim a deduction of up to ~50,000 on health insurance premium. If a senior citizen doesn’t have a health insurance policy, he/she can avail of a deduction of up to another ~50,000 on medical expenses.”

Section 80DDB: A senior citizen can claim deduction of up to ~1 lakh on expenditure for the medical treatment of specified diseases.

Section 80TTB: Senior citizens can claim deduction up to ~50,000 under this Section on the interest income from deposits held with a bank (savings or fixed), post office and co-operative society.

Section 80TTA (deduction on interest income from savings account up to ~10,000) is not available to senior citizens.

Standard deduction: A senior citizen can claim a standard deduction of~50,000 on his/her salary/pension income.

Tds-related norms: Section 194A of the I-T Act provides that any person (including individual or Hindu Undivided Family having specified turnover or receipts) who is responsible for the payment of interest, other than interest on securities, is required to get tax deducted at source (TDS). However, a senior citizen can apply to be exempted from TDS by submitting Form 15H, provided the tax calculated on his/her total income is zero. Rana says, “A senior citizen can also submit Form 15H to the deductor if his/her interest income is more than the basic exemption limit, but is expected to come below the exemption limit after availing of all deductions.”

No advance tax liability: Senior citizens are also not liable to pay advance tax.

Gaurav Awasthi, senior partner, IIFL Wealth, says, “Currently, senior citizens are not required to pay advance tax if they do not have any income from business and profession.”

One concession that has been allowed to super senior citizens from the assessment year 2019-20 onward is that they can file manual return in ITR Form 1/4.

Rajesh Bansal, managing director, Midas Finserve, suggests that senior citizens who wish to generate a regular income may invest in an immediate annuity plan. They must remember that income from annuities is taxable at the slab rate.