Tax

How Senior Citizens Can Reduce Tax On Their Pension Income

During the sunset phase of your life, you need not lose out on money. Here are suggestions that could help you overcome any such issue

Meghna Maiti

Updated on: 4 September 2024 4:22 pm

Senior Citizens Photo: Senior Citizens

How does it feel if you’ve worked hard all your life but discovered that what you receive as a pension is also taxed? It comes as an impediment to your post-retirement plans. As a result, you will have less pension money on hand than you hoped for. And it derails your plans. If you are in a situation like this, you have several options to reduce your tax liability as a senior citizen. Here are some strategies that can be applied:

1. Invest In A Five-Year Tax-Saver Fixed Deposit:

“Senior citizens can invest in a five-year tax-saver fixed deposit (FD), which qualifies for a tax deduction under Section 80C of the Income Tax Act. The maximum deduction allowable under Section 80C is Rs 1.5 lakh. Thus, it is advisable to limit the investment to Rs 1.5 lakh in this tax-saving FD. Further, the interest earned on such deposits is eligible for a further deduction of up to Rs 50,000 under Section 80TTB,” says Rahul Singh, senior manager, Taxmann, tax and corporate advisor. ALSO READ: Direct Tax Laws To Be Simplified: Here Are Key Things To Know

2. Invest In The Senior Citizens’ Savings Scheme:

The Senior Citizen Saving Scheme (SCSS) is a central government-sponsored program for seniors and retired persons. The amount deposited under the scheme is considered for tax deduction under Section 80C. However, interest earned under this scheme is taxable under the head’ Income from other sources.’

3. Deduction Of Medical Expenses If No Health Insurance Is Taken:

Under Section 80D, senior citizens can claim deductions of up to Rs 50,000 for health insurance premiums. If a senior citizen does not have health insurance, he can still claim a deduction of Rs 50,000 for medical expenses. ALSO READ: How To Track Short-Term Capital Gain, Intraday Income For Tax Purposes

4. Opt For The New Tax Regime:

“The Finance (number 2) Act 2024 introduced more relief to taxpayers opting for a new tax regime under Section 115BAC. Thus, now it is always beneficial for a senior citizen to opt for a new tax regime if he has only a Section 80C deduction to claim. Further, the new tax regime offers a higher standard deduction of Rs 75,000, compared to the Rs 50,000 available under the old tax regime. This increased deduction can further reduce taxable Income for senior citizens,” adds Singh. ALSO READ: Capital Gains Account Scheme (CGAS): How Does It Work And When Is It Used? By carefully selecting the right investments and taking advantage of available deductions, senior citizens can significantly reduce the tax they owe on their pension income.

Published At: 4 September 2024 4:22 pm