Income Tax for Senior Citizens Last Updated : 10 Jul 2020

There are multiple ways in which a senior citizen can earn his/her income. It can either be in the form of pension, interest on savings, rental income, fixed deposits, reverse mortgage, and so on. These incomes are taxable according to the Income Tax Act.

Tax Exemption for Senior Citizens

A senior citizen is an individual resident (man or woman) who is 60 years old or more but below 80 years as on the last day of the previous year (born on or after April 1st, 1935 and before April 1st, 1955). Senior citizens at source of income include pension, rental income, interest on savings, fixed deposits, senior citizen saving scheme, reverse mortgage and post office scheme. According to a Central Board of Direct Taxes directive, cases of senior citizens cannot be scrutinised unless an assessment is necessary on the basis of credible information.

Read more about e-Filing Income Tax, Income Tax Refund and Income Tax Refund Status

Exemption limit has been increased from Rs.2,50,000 to Rs. 3 lakh for the assessment year 2015-16. Under sections 80D and 80DDB, senior citizens can avail of deductions up to Rs.50,000 on their medical insurance premium and Rs.1 lakh for medical treatment of certain critical illnesses respectively. Under Varishtha Bima Yojana, senior citizens need not pay service tax on premium. If senior citizens want to gift objects, the items are exempted from tax. Senior citizens who have public provident funds can avail of exemption up to Rs.1,50,000 for the assessment year 2015-16. There is a 50% exemption of interest income for banks and post-office deposits (including FDs & RDs). Short-term capital gains will be exempt from tax if the basic limit at 15% is not exceeded. Under section 80L, senior citizens can avail of tax exemptions on interest up to Rs.12,000 p.a.

Calculation of Income Tax for Senior Citizens

Income tax calculator helps you calculate how much tax you are required to pay in addition to the applicable deductions. Income tax calculator not only calculates your total tax but also computes income from your house property. There are several online aggregators and financial websites which provide an income calculator wherein you can fill in all the required details such as the assessment year, age and your annual taxable salary. To calculate your taxable salary, you should have a clear picture of all the important components of your salary package such as your basic salary, fixed allowances, house rent allowance and bonus, if any. You have to enter the aforementioned details excluding retirement benefits such as gratuity and PF into the online calculator. You have to enter details related to TDS as well. To calculate the payable tax, you have to submit details regarding house property such as annual rental income as well. Several websites offer income tax calculators in an excel sheet format which can be downloaded.

Income Tax Calculation for Senior Citizens FY 2020-21

The income tax for senior citizens is calculated based on the basic salary, house rent allowance, fixed allowances, and other sources of income. However, the senior citizen receives higher exemption limit compared to individuals who are below 60 years old. In order to calculate the income tax for a senior citizen, all the income is taken into consideration along with the allowable deductions and the income tax slab for FY 2020-21. There various websites that offer an online income tax calculator. Once you have all the details, you can use the calculator to determine your taxable income.

In the Union Budget 2020-2021, a new tax regime for taxpayers was announced by the government of India. The Government of India gives taxpayers the choice to choose between the existing tax structure or the new one when filing taxes from FY2020-21 onwards.

Given below are the various tables for the latest Income Tax Slabs for the FY 2020-2021:

New Income Tax Slab for Individual (New Regime)

Income Tax Slab Tax Rate
Up to Rs.2.5 lakh No tax
Between Rs.2.5 lakh to Rs.5 lakh 5% (tax rebate of Rs.12,500 is available under section 87A)
Between Rs.5 lakh to Rs.7.5 lakh 10%
Between Rs.7.5 lakh to Rs.10 lakh 15%
Between Rs.10 lakh to Rs.12.5 lakh 20%
Between Rs.12.5 lakh to Rs.15 lakh 25%
Above Rs.15 lakh 30%

An additional cess of 4% will be levied for health and education on the tax calculated as per the above income tax slabs.

Under this new tax regime, there is no higher tax exemption limit for senior citizens (between the age of 60 and 80) or for super senior citizens (above the age of 80).

Note: New income tax rates are optional

Income Tax Slabs For Senior Citizens for Financial Year 2019–20

Tax applicable for individuals over 60 years and under 80 years

Income tax slabs Rate of tax Health and education cess
Income up to Rs.3 lakh* No tax NA
Income between Rs.3 lakh and Rs.5 lakh 5% 4% of income tax
Income between Rs.5 lakh and Rs.10 lakh 20% 4% of income tax
Income that exceeds Rs.10 lakh 30% 4% of income tax
  • *Income tax exemption limit is up to Rs.3 lakh {other than for those covered in part (I) or part (III)}
  • Surcharge if total income is more than Rs.50 lakh and up to Rs.1 crore: 10% of income tax
  • Surcharge if total income exceeds Rs.1 crore: 15% of income tax

Income tax slabs for super senior citizens (more than 80 years of age) for FY 2020-2021

Income tax slabs Rate of tax Health and education cess
Income up to Rs.5 lakh* No tax NA
Income between Rs.5 lakh and Rs.10 lakh 20% 4% of income tax
Income that exceeds Rs.10 lakh 30% 4% of income tax
  • *Income tax exemption limit is up to Rs.5 lakh {other than for those covered in part (I) or part (II)}
  • Surcharge if total income is more than Rs.50 lakh and up to Rs.1 crore: 10% of income tax
  • Surcharge if total income exceeds Rs.1 crore: 15% of income tax

Rebate in Income Tax for Senior Citizens

The rebate scheme under Section 87A is applicable for individuals where the total income is not above Rs.5 lakh. A rebate of Rs. 2,000 will be allowable for individuals with an annual income up to Rs.5 lakh. Hence, the payable tax amount will be Rs.23,000. For individuals who have a total income above Rs.5 lakh, the payable tax amount will be Rs.25,000 + 20% tax.

Income Tax Benefits for Senior Citizens

The senior citizens receive superior benefits when compared to non-senior citizens. The senior citizens are entitled to a deduction of the medical insurance premium for up to Rs.20,000. The senior citizens are also exempted from the payment of advanced tax. There are no deductions of TDS on earned interest. The section 80DDB provided a higher deduction for the ailment of specified diseases. The senior citizens are not required to pay tax for the amount received under Reversed Mortgage Scheme.

Income Tax Filing for Senior Citizens

The senior citizens are required to file their income tax return to claim their tax refund. The following Income Tax Return (ITR) forms are required to be filled by the senior citizens:

ITR I – Individual whose total Income Includes:

  • Salary or pension
  • Income from house or property (excluding incidents where loss is brought forward from previous financial years)
  • Income from the other sources (excluding income from horse racing or winning lottery)

ITR 2 - Individual whose total Income Includes:

  • Salary or pension
  • Income from house or property
  • Capital gains
  • Income from the other sources (includes winning from horse racing and lottery)
  • Incidents where the income of another individual, such as spouse or other member has to be combined with the income of the individual

Union Budget 2020-21 Deductions for Senior Citizens

  • Health insurance: Deductions of up to Rs.50,000 per annum can be claimed by senior citizens towards their health insurance premium and/or medical expenses. In the case of dependent seniors, a deduction of up to Rs.1 lakh can be claimed for critical illnesses that have been specified previously. This falls under Section 80DDB.
  • Pension: For pensions there is a standard deduction of Rs.40,000. This is for pensions in the form of annuity payments which are taxable just like the salaried income. It falls under Section 80D.

Union Budget - Tax Exemptions/Deductions for Senior Citizens

The Union Budget announced on 1st February 2018 by Arun Jaitley, has brought three vital provisions for tax deductions to enable the senior citizens of the country lead a prosperous and dignified life. Since health is a vital area of concern for aged people due to the frequent unexpected illnesses they are prone to and the high cost incurred on medical expenses as such, the government has offered the following tax benefits for the senior people:

  • Senior persons aged between 60-80 years can claim tax deductions of up to Rs.50, 000 on health insurance and medical expenses under section 80D. To offer this tax benefit to aged people, the limit of deduction has been raised from Rs.30, 000 to Rs.50, 000 in the new budget. Due to the introduction of this new rule, each and every senior citizen of India can now take benefit of up to Rs.50,000 tax deduction every year for any general medical expenditure or health insurance premium.
  • The senior citizens are now allowed to claim a tax deduction of Rs.1 lakh for medical expenditure in case of specific critical illnesses. The earlier deduction limits of Rs.60,000 for senior citizens and Rs.80,000 for very senior citizens are increased to Rs.1 lakh by the government this fiscal to offer a better life to the aged people of India.

Apart from these, for the senior citizens, deduction of the interest income on deposits with banks and post offices is increased to Rs.50,000 from Rs.10,000 under Section 194A. No TDS is not required to be deducted on this type of income. Senior citizens are also able to take this benefit for interest income on their fixed deposit schemes and recurring deposit schemes.

Income Tax Benefits for Senior Citizens

  • Interest income: Senior citizens are offered tax concessions on the interest income from post office deposits, fixed deposits, etc. These are often the major income source for senior citizens. There is a deduction of up to Rs.10,000 on the interest from a savings bank account for senior citizens.

Over and above that, there is a deduction of up to Rs.50,000 on the interest from post office deposits and fixed deposits. Banks will take Tax Deducted at Source (TDS) from the interest income of such sources only if it is more than Rs.50,000 for the financial year. For total income that is below the tax exemption limit, Form 15H can be submitted to the bank requesting that TDS is not deducted from that financial year. This interest exemption falls under Section 80TTB.

  • Advance tax: Senior citizens do not have to pay advance tax during the year as they do not have business income. They only have to pay the Self-Assessment (SA) Tax which is done after calculation of the final tax liability for the financial year.
  • Reverse mortgage: Senior citizens get special benefits under the reverse mortgage scheme. Under this scheme, their property value can be monetised to get EMIs in return which can supplement their income. This monthly amount that is received by senior citizens is exempt from tax on the side of the senior citizen. The payments continue for a lifetime. The senior citizen retains ownership of the house while residing in it. On the demise of the borrower, the loan is repaid through the sale of the property with accumulated interest. If there is a balance amount from the sale after repaying the loan, it is transferred to the legal heirs.

FAQ's On Income Tax for Senior Citizen

  1. Who is considered as a senior citizen?
  2. Individuals who are above 60 years of age but under 80 years of age are considered as senior citizens for accounting purposes.

  3. Who is considered as a super senior citizen?
  4. Individuals who are above 80 years of age are considered as super senior citizens

  5. What are the tax rates applicable to senior citizens and super senior citizens?
  6. There is a minor difference between the tax rates applicable to senior citizens and super senior citizens. While the minimum exemption limit for those who fall in the senior citizens category is Rs.3 lakh, those who qualify as senior citizens are exempt from tax if their income is under Rs.5 lakh. Apart from this, the slabs remain the same for both groups of taxpayers.

  7. Are there any benefits for senior citizens?
  8. Senior citizens, apart from making the most of a higher exemption limit, can also claim tax benefits under Section 80C, Section 80D and Section 80DDB of the Income Tax Act.

  9. Which form must I use to file my income tax returns?
  10. If you earn a salary or pension income, or income from your residential property, or income from other sources, you will have to use ITR-1. In case your income includes salary or income from pension, or income from residential property, or income from short/long term capital gains, or income from other sources, you will have to use ITR-2.

News About Income Tax Refund

  • Income Tax Dept keeps 31st March to measure senior citizen eligibility criteria

    While making an allowance for a greater exemption limit of taxation obligation for those aged above 60, it will be reflected to have reached a certain age on 31st March if his or her date of birth after 1st April as the Central Board of Direct Taxes stated based on an SC decision in 1986, which commanded all its Assessing Officers (AOs) to determine the age while estimating tax obligation of a citizen. Though there is no income tax imposed for senior citizens earning above INR 3 lacs per year, the same for very senior citizen is INR 5 lacs. As the age is verified, it should start from 12 AM.

    04 August 2016

Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.

This Page is BLOCKED as it is using Iframes.