Make the most of higher tax deductions to senior citizens, say experts

Those over 60 need not file ITR if any tax has been deducted under Section 194P

The last date for filing income-tax return (ITR) is July 31, 2022, so taxpayers should begin gathering the relevant documents and familiarising themselves with tax-filing rules. Senior citizens, in particular, are one set of taxpayers to whom a different set of rules apply.

Suresh Surana, founder, RSM India says, “A resident individual aged 60 years or above, who has not attained 80 years of age during the previous year, is considered a senior citizen for income-tax purposes. A resident individual aged 80 years or above is considered a super senior citizen.”

Select the right forms

Senior citizens can use ITR-1 to ITR-4 to file their returns, depending on the nature of their income. Ankit Jain, partner, Ved Jain and Associates says, “The forms automatically calculate the age based on the date of birth entered in them and apply the relevant slab rates to calculate the tax liability.”
 

Deepak Jain, chief executive, TaxManager.in adds that senior and super senior citizens may also need to fill a few other forms, such as 12BBA and 15H. The latter can help them avoid tax deduction at source (TDS).

Exemption from filing ITR

If a senior citizen’s tax has been deducted under Section 194P, he or she is exempted from filing ITR. However, he/she needs to fulfil a few pre-conditions to avail of this exemption. Maneet Pal Singh, partner, I.P. Pasricha and Co says, “The senior citizen should be of age 75 years or above, should have been a resident in the previous year, and must have only pension income and interest income. Moreover, the interest income earned should be from the same specified bank in which the pension is received.”To take advantage of Section 194P, however, senior citizens who fulfil the criteria, should file Form 12BBA with a designated bank.

No deadline has been prescribed for filing this form, but it should ideally be physically submitted to the bank at the beginning of the financial year to avoid inconvenience. Jain says, “The central bank provides a list of specified banks that handle tax deductions and rebates for senior citizens.”Naveen Wadhwa, deputy manager, Taxmann says, “By opting for Section 194P, senior citizens who meet the pre-conditions can avoid paying a fine of up to Rs 5,000 for missing the ITR filing deadline.”

Avail of relevant tax deductions

Senior citizens can also claim deductions on tax-saving investments. Suvigya Awasthy, associate partner, PSL Advocates & Solicitors says, “If a senior citizen has invested in the Senior Citizen Savings Scheme and other relevant tax-saving products, he/she can avail of deduction under Section 80C.

Section 80D deduction is also available on payments made towards health insurance premiums and preventive health check-ups.”The maximum deduction available on premium paid for senior citizens is Rs 50,000.

Section 80DDB pertains to medical expenditure. If the individual on whose behalf such expenses are incurred is a senior citizen, the individual can claim a deduction of up to Rs 1 lakh. Awasthy says, “This deduction is available for all senior citizens and super senior citizens.”Senior citizens are also entitled to a higher deduction on interest income. Surana adds, “Section 80TTB provides a deduction on interest income earned by resident senior citizens’ deposits in a bank account. The maximum deduction available is up to Rs 50,000.”

Don't forget to claim rebate

All residents (including senior citizens) whose total income during the previous year did not exceed Rs 5 lakh are eligible for a rebate under Section 87A to the extent of Rs 12,500. Wadhwa says, “However, the rebate is not available to resident super senior citizens as no tax is levied on their income of up to Rs 5 lakh.”

Finally, senior citizens who have no business or professional income are exempt from paying advance tax. Jain adds, “But that exemption is only available till the filing of tax return, so they should ensure that the tax return is filed on time to avoid interest or penalty.”