While making their tax-saving investments, senior citizens should take into consideration their other needs, such as the lock-in period of an investment, liquidity in case of medical or other emergencies, etc.
Senior citizens enjoy several income tax benefits. Both senior citizens between 60 and 80 years of age and super senior citizens above 80 years get such benefits in the form of relaxations in tax-filing procedures or higher deductions. Along with that, there are also several financial instruments that offer special benefits to senior citizens, such as monthly income schemes, higher assured returns on investments, etc.
However, while making their tax-saving investments, senior citizens should take into consideration their other needs, such as the lock-in period of an investment, liquidity in case of medical or other emergencies, etc.
Income of up to Rs 3 lakh is exempted from tax for senior citizens. However, senior citizens can enjoy higher basic exemption limit. Hence, if investments are well-planned, more can enjoy the tax-free income of up to Rs 5 lakh.
Senior citizens also get deductions under sections 80C and 80D. Under Section 80C, senior citizens get deductions of Rs 1.5 lakh on instruments like National Savings Certificate, insurance, tax-saver fixed deposits (FDs), notified mutual funds, etc. Other than that, usually, senior citizens also get a higher interest rate on fixed deposits, of up to 50 basis points.
On the interest income from savings or fixed deposits held with a bank, post office etc., senior citizens can also claim deduction up to Rs 50,000, under section 80TTB.
Senior citizens also enjoy higher deduction on health insurance premium. For instance, as a senior citizen, you can claim a deduction of up to Rs 50,000 on your health insurance premium. If you don’t have a health insurance policy, you can avail of a deduction of up to Rs 50,000 on your medical expenses. Additionally, under section 80DDB, on expenditure for the medical treatment of specified diseases, senior citizens can claim a deduction of up to Rs 1 lakh.
A standard deduction can also be claimed by a senior citizen of Rs 50,000 on their salary or pension income. If a senior citizen does not have any income from business and profession, they are also not liable to pay any advance tax.
By submitting Form 15H, senior citizens can also be exempted from tax deducted at source (TDS), given that the tax calculated on the individual total income is zero, or below the exemption limit after availing of all deductions.