From special saving schemes to higher deductions, the Income-Tax Act offers a number of respites for the elderly

It is said the character ofa society can be judged by the way it treats its elders. In India, a lot of benefits have been granted to senior citizens. These are available in the form of special saving schemes, pension schemes, postal schemes, mediclaim policies and the likes. In this piece, we will dwellon the income-tax benefitsavailable to senior citizens.

Under the Income-Tax Act, a senior citizen is a person who was of 65 or above of age during the year. Senior citizens do not have to pay any income-tax up to income of Rs 2.4 lakh, as against a limit of Rs 1.6 lakh applicable for ordinary individual. As a senior citizen, you can claim deduction of up to Rs 1 lakh each year under Section 80C in respect of money deposits made under senior citizens saving scheme rules, 2004.

This provision is significant when other avenues forclaiming tax deductions under Section 80C like life insurance premium, payment towards pension plan, contribution to PPF account, Ulip etc are no longer remain attractive to senior citizens.

While the Income-Tax Act considers only people above 65 years of age as senior citizens, under the senior citizen scheme, the age limit has been reduced to 60 years. This is further relaxed to 55 years in case you have taken VRS and the retirement money is invested within a period of three months in the scheme. The rate of interest under this scheme is 9% currently which is higher than on any other risk-free investment avenue available today and that too with tax deduction.

The general deduction in respect of insurance premium for health insurance (popularly known as mediclaim) is Rs 15,000 for a family. However if premium is paid for a senior citizen, the deduction available goes up to Rs 20,000. In case premium is paid for a parent who is a senior citizen, the person paying the premium can claim a separate deduction of Rs 20,000 in addition to a claim of Rs 15,000 for premium paid for self, spouse and children. In case of the person paying the premium, as well as hisparents who are senior citizens, the deduction available foreach category will be up to Rs 20,000 each.

The Income-Tax Act also allows deduction for expenditures actually incurred for treatment of family members in respect of some specified diseases. Section 80DDB allows a deduction of Rs 40,000 for treatment of self, spouse, siblings, parents, and children for treatment of specified disease. However this deduction goes up to Rs 60,000 in case the person treated is a senior citizen.

Senior citizens can also submit Form No 15H for no deduction of tax at source to the payer of interest, or for withdrawals from NSS account, and income from units of mutual funds and total tax liability is nil for the year in question. As a senior citizen, if you are not engaged in any business or profession, you will not be required to file a return of income even if you fall into the criteria on ownership/ occupation of immovable property or subscription of a telephone under the popularly known 'one by six scheme'.

However, you will have to file a return of income under the scheme if you fulfill any of the other four criteria. This exemption is available only if the senior citizen does not have a taxable income.

Source: http://digital.dnaindia.com/