Senior Citizen Tax

Individuals who have attained 65 years are judged as senior citizens in India for taxation purposes. This segment enjoys a high tax exemption limit, which is Rs.2,40,000 for the assessment year 2010-2011. This implies that a senior citizen is only liable to pay taxes when his/her income exceeds this level.

Senior Citizen Tax Benefits

The government offers several tax benefits and exemptions to senior citizens for encouraging them to continue earning and investing. Tax rebate under section 88B is the most noteworthy benefit offered to senior citizens. This section of the Income Tax Act, 1961 enables pensioners, salaried and self-employed individuals over 65 to waive off up to Rs.20,000 from their tax liability.

Other tax benefits available to senior citizens include deductions under the following sections:

• 80D: On account of medical insurance premium, up to Rs.20,000
• 80DDB: In respect of medical expenses and cost of treatment (for specific diseases), up to Rs.60,000

Senior Citizen Savings Scheme (SCSS)

This tax saving scheme can be availed by an individual who has attained 60 years. Additionally, individuals under the voluntary retirement scheme can invest in this scheme if they are above 55 years. Investment in SCSS is made in multiples of Rs.1,000, subject to a ceiling of Rs.15,00,000. Some special features of the SCSS are:

• Interest rate of 9%, which is payable quarterly
• Tenure of deposit of five years, which may be extended further by three years
• Option for premature withdrawal after a lapse of one year since opening the account, subject to a penalty.
• Option to open account with spouse
• Nomination facility

Note: Although, the investment made in the SCSS is tax deductible, under section 80C, the interest earned on it is fully taxable.