Higher exemption limit
Senior citizens and very senior citizens enjoy a higher exemption limit as compared to non-senior citizen tax payers. Exemption limit is the level of income up to which a person is not liable to pay any tax to the government.
For FY 2020-21, exemption limit for a senior citizen is set higher at ₹3,00,000. The exemption limit for an ordinary individual tax payer is ₹2,50,000. An additional benefit of ₹50,000 in the form of higher exemption limit is available to a resident senior citizen.
A very senior citizen is granted an even 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, is liable to pay an 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 is not liable to pay advance tax, provided he does not have any income from business or profession.
Eligibility to file income tax return manually
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.
Higher deduction limit on interest income on bank deposits and post office
Interest earned on saving deposits and fixed deposit with banks or post office or co-operative banks for an amount up to ₹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.
An individual non- senior citizen tax payer is eligible for a tax deduction of up to ₹10,000 under Section 80TTA in respect of interest income on savings bank account.
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.
Benefit of standard deduction
From AY 2019-21, a standard deduction up to ₹40,000 against salary income earned during the year has been introduced. Accordingly, a senior citizen who is in receipt of pension income from his or her former employer can claim a deduction up to ₹40,000 against such salary income.