Tax benefits for senior citizens: How can you maximize savings in AY 2025-26? | Mint

Having a constant source of income adjusted with rising costs in India is a challenge, especially for senior citizens and those not actively employed. For those citizens who have a fixed pension income that does not account for the changing costs of goods and services in the country, the taxation system provides certain advantages to ease the financial stress of senior citizens.

Who is a senior citizen?

In India, anyone over 60 is regarded as a senior citizen, while an individual over 80 is considered a super senior citizen for income tax purposes.

Tax benefits for senior citizens

The Income Tax of 1961 provides certain tax benefits to senior and super citizens to help them in old age.

Exemption limit

The exemption limit, which is the maximum amount beyond which income tax calculation is not applicable, is higher for senior citizens. The exemption limit for senior citizens is ₹3 lakh, while it is ₹5 lakh for super senior citizens. For individuals lower than the age of 60, the exemption limit is ₹2.5 lakh.

“A well-deserved benefit for them (senior citizens) would be a higher exemption limit. With these limits, tax liabilities will be lowered and hence increase their disposable income,” according to Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited.

Taxes on medical expenses

Medical costs form a significant component of expenses for elderly people. The IT Act provides for certain benefits on medical costs.

“The taxable income of elderly taxpayers can now be further lowered due to their qualification for tax deductions under Section 80D up to ₹50,000 on health insurance premiums paid within that year,” Maurya said.

Section 80D of the IT Act is regarding tax deductions to individuals up to Rs. 25,000 and ₹50,000 for senior citizens for the premiums paid on health insurance in a financial year.

“Declared medical expenses in excess of ₹50,000 paid on non-insured senior citizens (over 60 years old) are also acceptable submissions,” he added.

According to Saif Ahmad Khan, Founder, LEDSAK.AI, “Section 504 relaxation exists under Section 80DDB whereby senior citizens can claim a deduction of one lakh rupees of expenditure incurred in respect of the treatment of listed major diseases.”

Tax deductions on interest earned

There is a provision of tax deductions under interest earned from savings accounts, fixed and recurring deposit accounts, making it beneficial for those citizens who only rely on interest income.

“Senior citizens have also been provided with an exclusive benefit under Section 80TTB that grants them the opportunity to claim up to ₹ 50,000 as deductions on earned interest from savings accounts, fixed deposits and recurring deposit accounts. This holds true for those individuals for whom interest income is the sole breadwinner,” Maurya said.

Tax rebate

Senior citizens also get a tax rebate, which is a refund if the tax paid exceeds tax liability.

“Within the confines of Section 87A, senior citizens with a total annual income not exceeding ₹5 lakh are eligible for a tax rebate of up to ₹12500, which means they will be tax-free within certain limits,” Maurya said.

No advance tax

According to Maurya, “senior citizens do not need to deposit advance tax unless they earn business or professional income. These provisions regarding tax are intended to reduce the economic pressure and protect the retired persons even more. Senior citizens are advised to use these provisions when determining the widows’ investments in order to save on taxes and enhance the cash flow.”

Income tax returns

According to the IT Act, senior citizens above the age of 75 years are not required to file income tax returns if they earn pension income and interest from only one bank on submitting a declaration under Form 12BB. “Having this exclusion decreases the degree of adherence requirements and enables easier handling of finances,” according to Khan.

Tax benefits on personal loans

Senior citizens who take a personal loan for certain purposes can claim tax deductions. Under section 24(b),  taxpayers can claim deductions on account of a loan taken for the purchase, construction, repair, reconstruction or renewal of property, as per the Income Tax Act, 1961.

Personal loans taken for business and investing purposes can provide certain tax benefits for senior citizens to address business expenses as well.

In conclusion, learning about income tax benefits and provisions is essential for senior citizens to fully take advantage of facilities provided by the Indian government. In case, any senior citizen faces trouble in understanding certain tax exemptions and deductions, they must reach out to a financial advisor who can assist them.