Income Tax Allowances for Senior Citizen
The Income Tax Department gives special tax benefits to senior citizens. A person between 60 and 80 years is considered a senior citizen and a person above 80 years of age is a very senior citizen. We have figured out a few of the best opportunities which senior citizens and very senior citizens can avail themselves of. Here are a few of the opportunity points.
Higher exemption limit
Paper filing of Income Tax Return
Relief from payment of advance tax
Income tax deduction on interest on bank deposits
Medical insurance and expenditure Tax benefits
Higher exemption limit
A part of income up to which a person is not liable to pay tax is considered as Exemption limit. Senior citizens have higher benefits as compared to non-senior citizens.
In the financial year, 2020-21 exemption limit for non-senior citizens is Rs 2.50 lakh, a senior citizen can avail an exemption up to Rs 3 lakh. As per the law, senior citizens get an additional benefit of Rs 50,000 and senior citizens enjoy an even higher exemption limit upto Rs 5 lakh.
Paper filing of Income Tax Return
The Income Tax allows very senior citizens to file income tax returns(ITR by forms 1 & 4) in paper mode. e-filing option is also available.
Relief from payment of advance tax
According to section 208, Every person has to pay advance tax if his/her estimated tax liability for the year is Rs 10,000 or more. But, Section 207 gives special benefits to a resident senior citizen, not having any income from business or profession, are exempted from advance tax.
Income tax deduction on interest on bank deposits
Under Section 80 TTB of the IT Act, which allows tax benefits on interest earned from deposits with banks, post office, or co-operative banks. The deduction is applicable for a maximum interest income of up to Rs 50,000 earned by the senior citizen. Interest earned on saving deposits and fixed deposits are eligible for deduction.
And under Section 194A of the IT Act, no tax is deducted at source (TDS) on interest payment of up to Rs 50,000 by the bank, post office or co-operative bank to a senior citizen and this limit is to be computed for every bank individually.
Medical insurance and expenditure Tax benefits
According to Section 80D of the Income Act, senior citizens can have a higher deduction of up to Rs 50,000 for payment of premium towards medical insurance policy and in case of non-senior limit is Rs 25,000.
Further Section 80DDB of the IT Act allows a tax deduction on expenses incurred by an individual for the treatment of specific diseases as specified in the act. The maximum deduction for a senior citizen is Rs 1 lakh and for the non-senior taxpayers, it is 40000.
Income Tax Allowances for Salaried Individuals
Salaried employees have a huge contribution to income tax collections. People always look for opportunities where they can have saving from income tax. We have figured out a few of the deductions and exemptions and, one could reduce his/her tax substantially.
Here are a few of the ways by which a salaried person can reduce his income tax liability.
- House Rent Allowance
- Standard Deduction
- Leave Travel Allowance (LTA)
- Mobile reimbursement
- Books and Periodicals
- Food coupons
- Relocation allowance
- Children Allowances
House Rent Allowance
A salaried individual having a rented accommodation can save many bucks by getting the benefit of HRA (House Rent Allowance). This will depend on the allowance you get which will decide whether you will be totally or partially exempted from tax. However, if you aren’t living in any rented accommodation and still receive HRA, it’ll be taxable. So, next time keep rent receipts and evidence of any payment made towards rent which will save your money.
Standard Deduction
In the Union Budget 2018, the standard deduction was announced Rs. 40,000 for salaried employees and which was increased to 50,000 in the interim budget 2019. The amount is divided such that transport allowance (Rs. 19,200) and medical reimbursement (Rs. 15,000). Due to this salaried people have the opportunity to receive an additional income tax exemption of Rs. 5,800 in FY 2018-19.
Leave Travel Allowance (LTA)
Law also provides Leave Travel Allowance exemption to salaried employees, limited travel expenses incurred during leaves by them. Shopping, food expenses, entertainment, and leisure are included in the exemptions. In four years People can claim LTA twice.
LTA only covers domestic travel and not the value of international travel.
The mode of such travel must be either railway, aviation, or conveyance.
Mobile reimbursement
Expenses on mobile and telephone used at residence can be claimed by the taxpayer. The tax law allows an employee to claim a tax-free reimbursement of expenses.
Reimbursement can be claimed on the actual bill amount paid or the amount provided in the salary package, whichever is lower.Books and Periodicals
Expenses on books, newspapers, periodicals, and journals can be incurred by employees. The tax law allows an employee to claim a tax-free reimbursement of the expenses incurred.
The reimbursement allowed to an employee is the lower of the bill amount or the amount provided in the salary package.
Food coupons
Your employer may provide you with meal coupons like Sodexo. Such food coupons are taxable as perquisite within the hands of the worker. However, such meal coupons are tax-exempt up to Rs 50 per meal.
A calculation based on 20 working days and 2 meals a day results in a monthly benefit of Rs 2,000 (20*100) with this the yearly exemption works up to Rs 24,000.
Children Allowances
The employer may provide you education allowance for your children as part of your salary. Such allowance received by the employer towards children’s education is exempt from tax.
The employee can claim a maximum of Rs. 100 per month as exemption or Rs. 1200 per annum. The exemption is allowed for a maximum of 2 children.
Source :- Cleartax
Exemption in income tax for ladies
Under Section 80 of the Income Tax Act are some of the exemption limits applicable for income tax payment.
As per the Section 80C, women can have an exemption of up to ₹1.5 Lakh for their earnings from the following:
- 5-year tax-saver fixed deposits.
- National Savings Certificate.
- National Pension Scheme.
- Equity Linked Savings Scheme.
- Employees Provident Fund.
- Senior Citizens Savings Schemes.
- Sukanya Samriddhi Yojana, etc.
As per the Section 80CCC –
Women can have Exemption on the deposited amount in insurance annuity plans. ₹1,50,000 is the exemption limit under this section.
Section 80TTA – Up to ₹10,000 exemption on interest earned from the varied bank account.
Section 80D – Exemption on the payment of insurance policy premium for self, spouse, dependent children, parents, etc. The limit for this exemption is set at:
- Self, spouse, and dependent children ₹25,000
- For self, spouse and dependent children ₹25,000 + ₹25,000 For parents
- For self, spouse and dependent children ₹25,000 + up to ₹50,000 (for parents above 60 years of age)
- Up to ₹50,000 (self, spouse, and dependent children with the eldest member above 60 years of age) + up to ₹50,000 (for parents above 60 years of age)
Section 80E – As per this section exemption on the entire interest purchased for any education loan. There is no limit to exemption.
Section 80GG – In this section, it is said that exemption will be given on rent payment if you don’t receive House Rent Allowance. The limit to the present exemption is about at the lower amount between the following:
- Total rent paid – 10% of your total income.
- 25% of your total income.
- ₹5,000 per month.
Section 80DDB – in this section medical treatment exception will be a dependent individual who is suffering from specific diseases. The limit for this exemption is up to ₹40,000 for people below 60 years of age.
If the age of the dependent individuals is above 60 years, you’ll avail of a tax exemption of up to ₹1,00,000.
Section 80GGC – As per this section exemption on contribution to political parties. There is no limit to the exemption if the payment is formed through methods aside from cash.
Section 80G – As per this section exemptions for contributions to charitable institutions and a couple of relief funds. For some cases, you can avail an exemption of up to 50% of your donation while contribution to other funds allows 100% tax exemptions.
Section 80CCG – As per this section, Women can avail of exemptions on investments in equity products under the Rajiv Gandhi Equity Scheme. In this case, exemptions are the lower amount between:
₹25,000.
50% of your investment amount in equity schemes.
Section 80DD – As per this section exemptions on medical treatment for a handicapped or dependent loved one. Following are the exemption limits under this section:
- If the handicapped individual has a bodily or mental disability of 40-80%, then you will be able to avail an exemption of up to ₹75,000.
- If the bodily or mental disability is above 80%, then the tax exemption limit is set at ₹1,25,000.
Section 80 TTB – As per this section, women will be able to avail an exemption on the interest earned by senior citizens. But ₹50,000 is the exemption limit.
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