Ways for Retirees to Reduce Taxes: Senior Citizens Tax Saving Tips 2024

Tax planning tips for elderly taxpayers

For retirees, cutting costs isn't the only goal; it's also about making prudent choices that will prolong the life of their money.

ITR 2024 tax-saving strategies for seniors

1. A Greater Tax Exemption: The exemption limit for individuals aged 60 to 80 is 3 lakh rupees, which is higher than the 2.5 lakh rupees allowed for those under 60. An even higher exemption limit of Rs 5 lakh applies to senior citizens aged 80 and up. They can reduce their taxable income this way.

2. Deductions Under Section 80TTB: The Income Tax Act permits senior citizens to deduct interest earned from deposits with banks, co-operative societies, or post offices up to Rs 50,000 per annum under Section 80TTB. Section 80C allows a deduction of up to Rs 1.5 lakh, but this amount is higher.

3. Take Advantage of the Standard Deduction: The Budget 2020 introduced a standard deduction of Rs 50,000, which senior citizens can benefit from. It helps alleviate the tax burden and applies to pensioners regardless of employment status.

4. Premiums for Health Insurance: Under Section 80D, seniors are eligible for larger deductions for health insurance premiums. Premiums for health insurance paid by either spouse can be deducted up to Rs 50,000 per annum, which is more than the Rs 25,000 limit for individuals under the age of 60. Also, a super senior citizen or dependent over the age of 60 or 80 can claim up to Rs 1 lakh in medical expenses as a tax deduction under section 80DDB.

5. SCSS: This is a government-sponsored savings program for people who are 60 and older. It provides a safe and appealing investment option with a set interest rate that is payable every three months. As of the end of the third quarter in March, the scheme's interest rate was 8.20%, and participants could claim tax deductions of up to 1.5 lakh rupees under Section 80C.

6. Public Provident Fund (PPF): PPF is a tax-efficient savings tool because neither the interest nor the proceeds from maturity are subject to taxes. A 15-year lock-in period, tax deductions (up to Rs 1.5 lakh under Sec 80C), and a 7.1% return guarantee as of the March end quarter are all available to senior citizens.

7. The National Savings Certificate (NSC): Offering a term of up to five years, the NSC carries a low level of risk. Interest accrues with annual compounding and is distributed to the investor and principal upon maturity, with no upper limit in sight. When the senior citizens reinvest their interest each year, they can take advantage of tax benefits thanks to Section 80C of the Income Tax Act.

8. Regular Fixed Deposits: Banks also offer regular fixed deposits that seniors can invest in, which can save them money on taxes. Typical terms for these fixed deposits are five years, and they, like other tax-saving instruments, offer tax advantages under Section 80C. Though the interest paid on these accounts is subject to taxation, senior citizens have the opportunity to earn higher interest rates compared to regular depositors.