Every retiree recognizes that personal finance never sleeps. A retirement corpus requires regular rebalancing. The personal finance story goes on even after the paychecks stop. So, retirement is a break from work and not from managing money. Einstein was once known to have remarked that the hardest thing in the world to understand was income taxes. It’s time we demystify tax benefits that are exclusive to senior citizens.
Per the latest budget, if the gross annual income of a resident individual is below Rs. 5 Lakhs the tax is eligible for a rebate of up to Rs. 12,500. Senior citizens have different income tax slabs. For Senior citizens income below Rs. 3 Lakhs is exempt from tax and for super senior citizens (above 80 years of age) income below Rs. 5 Lakhs is exempt from tax. Income between Rs. 3 Lakhs and Rs. 5 Lakhs will be taxed at 5% for senior citizens. The rates and slabs hereafter are the same for all citizens.
Under Section 80 TTA, interest income up to Rs. 10,000 is deductible from the total income. Senior citizens may opt for the deduction under Section 80 TTB of Rs. 50,000. Seniors can opt for the deduction under either Section 80TTA or Section 80 TTB and not both. Interest income includes interest earned on the savings bank account, fixed deposits, and post office savings schemes.
A standard deduction of up to Rs. 50,000 is applicable on salaried-income. Even though seniors may not collect paychecks, they could still take advantage of this tax benefit. The standard deduction applies to income earned through pensions or annuities.
Reverse Mortgage Loans
Income from Reverse Mortgage Loans (RML) is not taxable. Click here know more about the other features of a reverse mortgage loan.
Health is a priority throughout. Seniors have an added tax benefit when it comes to medical expenses. Per the Income Tax Act, expenses towards defined specified illnesses can be claimed as a deduction. This is subject to a limit of Rs. 1 Lakh.
Medical Insurance Premiums
Health insurance becomes more costly with age. Seniors may claim a deduction of up to Rs. 50,000 towards health insurance premiums and preventive health checks. If a son or daughter is paying the premium, the benefit may be transferred to them.
Government Savings Schemes
There are two government schemes exclusive to Senior Citizens. One is the Senior Citizen’s Savings Scheme which is similar to a fixed deposit with a quarterly payout. The Pradhan Mantri Vaya Vandana Yojana is a 10-year pension plan with return of purchase price. A more detailed comparison is available in the table below.