Tax planning is an important aspect of financial planning for any individual and it is no exception for a senior citizen. Currently a senior citizen can save up to Rs 3 lakh per year and if investments are well-planned, one can enjoy tax-free income up to Rs 5 lakh and above.
However, while making any tax-saving investment, senior citizens should take into consideration their other needs, such as the lock-in period, liquidity in case of emergencies, rate of return etc.
Under section 80C of the Income Tax Act, senior citizens get deductions up to Rs 1.5 lakh on instruments like PPF, Senior Citizen Savings Scheme, NSC, any type of insurance, tax-saver FD, ELSS and others. Experts always advise that one can utilise section 80C fully to get maximum tax benefit.
On the interest income from savings or fixed deposits held with a bank or multiple banks, post office etc., senior citizens can also claim deduction up to Rs 50,000, under section 80TTB.
In the case of senior citizens, the deduction limit allowed is Rs 50,000 under section 80D, i.e. a person can save up to this limit by paying the premium towards medical insurance policy for himself and the spouse.
Deduction under section 80DDB is allowed for medical treatment of a dependent who is suffering from a specified disease. A senior citizen can claim up to Rs 1 lakh or the amount actually paid, whichever is less.
For very senior citizens (above 80 years) Rs 80,000 is the maximum deduction that can be claimed by a person.
A standard deduction can also be claimed by a senior citizen of Rs 50,000 on their salary or pension income in a fiscal year.
By submitting Form 15H, senior citizens can also be exempted from any TDS they are levied during the fiscal year.
Tax calculation of a senior citizen is very important, and one must make tax-saving investments wisely. “Selecting the right investment instrument which gives a senior citizen both the benefits of growing his/her money and tax savings is most important financial task before the person,” said Arvind Agarwal, an IT expert to Money9.
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