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7 WAYS TO SAVE TAX IF YOU ARE A SENIOR CITIZEN

59-year-old Mr. Batra is just a few short months away from retirement. He is looking forward to a time when he can relax and enjoy the fruits of his labour. An astute investor, Mr. Batra has religiously put away money in various investments. He has some mutual funds, fixed deposits, life and health insurance policies among other investments. As he is on the brink of retirement and entering the “senior citizen” category officially, he is determined to find out how he can save taxes as he enters this new tax bracket. He’s how Mr. Batra can save taxes as a senior citizen.

Tax saving as per income tax slab rates:

As Mr. Batra moves from a regular tax payer, to a senior citizen tax payer, his income tax slab and rates will also change. Unlike regular tax payers, who are exempted from paying taxes if their incomes are below ₹250,000 per annum, Mr. Batra is exempted from paying taxes if his annual income is up-to ₹300,000. Furthermore, if his total income is between ₹300,000 and ₹500,000; he must pay only 5% tax on amounts exceeding ₹300,000; if the income is between ₹500,000 and ₹1,000,000 he would come under the 20% taxable bracket and if his income exceeds ₹1,000,000, he must pay 30% tax.

For senior citizens above 80 years of age, you become eligible for tax exemption on an annual income of ₹500,000. If your annual income is between ₹500,000 – ₹1,000,000, you must pay 20% tax on amounts exceeding ₹500,000 and if your income exceeds ₹1,000,000 you come under the 30% tax slab.

Tax deduction on SCSS investments:

Mr. Batra may invest a maximum of ₹15,00,000 or the amount received on retirement, whichever is lower, in the Senior Citizen’s Saving Scheme. He can earn tax deductions of up-to ₹150,000 as per Section 80C of the Income Tax Act.

Tax deduction on interest:

As per Section 80TTB of the Income Tax Act, Mr. Batra becomes eligible for tax exemption up to ₹50,000 on the income he earns from his fixed and recurring deposits, and post office deposits. So if Mr. Batra earns an annual income of ₹75,000 on his fixed deposits, he will receive tax exemption on ₹50,000 whereas ₹25,000 will be taxable.

Increased exemption limits for health insurance:

As a regular tax payer, Mr. Batra was eligible for tax deductions of ₹25,000 on the health insurance policy covering himself, his wife and children. However, as a senior citizen, he is now eligible for tax deductions of ₹50,000 if he continues to pay the health insurance premiums. Moreover, if Mr. Batra is also paying the insurance of his senior parents, he becomes eligible for an additional deduction of ₹50,000. As such, he can save ₹100,000 per annum toward health insurance policy premiums paid for his family and his parents.

Increased exemption limits for medical expenses:

The Indian government has increased the tax exemption limit for medical expenses which are incurred due to critical illnesses such as cancer, AIDS, renal and cardiovascular problem etc. As such, all senior citizens getting treatment for such illnesses can avail tax exemptions of ₹100,000 under Section 80DDB.

Exemption from paying advance tax:

As a senior citizen who is not a business owner, Mr. Batra does not have any business income. This exempts him from paying any advance tax. He can simply pay the self-assessment tax on his total income.

Non-deduction of TDS on interest:

As mentioned above, if Mr. Batra earns an annual income not exceeding ₹300,000 he is exempted from paying income tax. He may however have income from fixed deposits. In such a case, he can simply submit Form 15H so that there is no TDS deduction on the interest accrued on bank fixed deposits

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