10 Senior Citizen Specific Financial Benefits Millennials Must Tell Their Parents!

As soon as we millennials step into our 20s and 30s, we are busy amidst our quest to create a career and become financially independent, right?

But while we continue to take big steps in our career in order to live a financially stable life, one aspect we often forget is about our parents¡¯ finances. In our 20s and 30s, our parents must have either entered their 60s or are about to.

That's exactly why we millennials must ensure that our parents are aware of the senior citizen specific financial benefits that can prove to be helpful in managing their hard earned money. In fact, in some ways, these benefits can even help your overall family¡¯s finances as well.

Wondering how? Read on as we explain some of the major senior specific financial benefits which many of you and your parents might not be aware about!

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1.Relaxed rates for lower tax slabs

For senior citizens aged 60 to less than 80 years, and those equal to or above 80 years (very senior citizens), there are slightly relaxed tax rates for those falling to lower tax slabs in the old tax regime. Whereas in the new tax regime, there¡¯s no separate tax slab or rate for senior citizens.

Under old regime, for ordinary individual tax payers the basic exemption limit up to which he/she is not required to pay any tax is presently fixed at Rs. 2.50 lakhs However, for Senior Citizens the basic exemption limit is fixed at a higher figure of Rs. 3 lakhs. Very Senior Citizens do not have to pay any tax or file return up to Rs 5 lakhs of annual total income.

For tax slab of Rs 2.5-5 lakh, resident individuals below 60 years are taxed at 5% (tax rebate u/s 87a is available), which is the same for senior citizens aged 60 to less than 80 years for that slab. For tax slabs above Rs 5 lakh, the rates are same for all age groups.

2.No payment of the advance tax is required

As mentioned in Finance Bill 2022, every person whose estimated tax liability for the year exceeds Rs. 10,000 shall pay his tax in advance in the form of ¡°advance tax¡± by the due dates prescribed in this regard. However, as per section 207 of the income tax act, a resident senior citizen (i.e., an individual of the age of 60 years or above) not having any income from business or profession is not liable to pay advance tax.

3.Availability of Form 15H for Non-deduction of TDS

A senior citizen may submit form no. 15H to the deductor for non-deduction of TDS on certain incomes referred to in that section, if the tax on his/her estimated total income of the concerned year comes at nil.

4.Higher deduction under Section 80DDB for specified illness

For general taxpayers, the amount of deduction available in respect of expenses incurred for medical treatment of specified disease or ailments of self or dependent relatives u/s 80DDB is 40,000. However, in case the expenses are incurred by the taxpayer in respect of a dependent senior citizen, the entitlement is 1 lakh in a year from A.Y. 2019-20 onwards.

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5.Interest income exemption of up to Rs 50,000

Senior citizens can claim exclusive tax deduction of up to Rs 50,000 under Section 80TTB on the interest income earned from deposits held with banks, post offices and co-operative banks. These term ¡®deposits¡¯ include savings account, term deposits and recurring deposits. This deduction is especially important as most banks offer incremental interest rate of 50 bps on fixed deposits opened by the senior citizens. Awareness of this deduction will help conservative senior citizens in planning their tax-savings investments to earn tax free returns.

6.No capital gain tax in case of reverse mortgage

For the uninitiated, reverse mortgage is a loan facility to help in cashflows. It allows retirees to pledge their house property against either a lump sum amount or periodic disbursals spread over their remaining lifetime. The loan¡¯s repayment is not triggered either until the borrower¡¯s death or him/her moving out of the pledged house. If the borrower or his/her heir fails to make loan¡¯s repayment, the outstanding loan amount and interest accrued is recovered by the lender through the property¡¯s sale. If any surplus is generated from the property sale , it is distributed to the borrower or his heirs.

So, retirees who own a house property but lack adequate pension and/or post-retirement corpus to support themselves can opt for the reverse mortgage loan facility offered by some lenders. Also, the transfer of a residential house property by way of a reverse mortgage for senior citizens, is not liable to be taxed as Capital Gain (nor under any other head of income).

7.Higher interest rates on FDs

Most banks and post offices are offering higher interest rates for deposits made by senior citizens, such as fixed deposits (FD), recurring deposits (RD), etc. Generally, lenders offer at least 0.25-0.5% higher interest rate for such deposits.

8.Higher Deduction limit for interest earned from Bank and Post Office

Individual taxpayers other than senior citizens are allowed maximum deduction of Rs. 10,000 u/s 80TTA in respect of interest income from saving bank accounts. However, from AY 2019-20 onwards, a senior citizen can claim deduction upto Rs. 50,000 u/s 80TTB in respect of interest income earned on not only savings bank accounts but also on interest income earned on any bank deposits or any deposit with post office or cooperative banks.

Further, if such interest income earned by him during the year is less than Rs. 50,000, the payer bank/ post office will not deduct any tax from such interest income.

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9.Higher Deduction limit for Medical Insurance Premium

The maximum limit for deduction u/s 80D in respect of payment made for health insurance premium in respect of a senior citizen has been allowed at Rs 50,000 as against that allowed to other individuals at Rs 25,000. Deduction upto Rs 50,000 is also allowed for medical expenses incurred on the health of a Senior Citizen provided no amount is paid for health insurance of such person. For claiming this deduction, it is mandatory that the health insurance premium/ medical expenses are paid by any mode other than cash.

10.Doorstep banking

The RBI has advised banks to make efforts to offer certain basic banking services to senior citizens of more than 70 years of age and differently abled persons at the doorstep of such customers. As per the guidelines, banks shall offer the doorstep banking services on pan India basis. The list of branches offering such doorstep banking services shall be displayed/updated on the bank¡¯s website regularly, as per RBI.

Also, the charges in this regard, if any, shall also be prominently indicated in brochures and published in their websites. The basic doorstep facilities for senior citizens shall include a wide range of services such as pick up of cash and instruments against receipt, delivery of cash against withdrawal from account, delivery of demand drafts, submission of KYC documents, and Life certificate at the premises/ residence of such customers, etc.

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