Union Budget 2021 / Senior citizens over 75 with only pension and interest income exempt from filing ITR

New Delhi: Budget 2021 proposes to exempt senior citizens who are 75 years or above and have only pension and interest income in a financial year, from filing income tax returns. As per the Budget 2021 proposals, they will not be required to file income tax returns (ITR) anymore. The bank paying income to them will deduct the necessary tax from their bank account.

This has come after Budget 2018 had announced several tax law changes to provide more tax benefits to senior citizens. These included tax benefits such as introduction of a new section 80TTB in the Income Tax Act, 1961, deduction for medical expenditure in case of no health insurance coverage etc.

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Under section 80TTB, seniors can claim up to Rs 50,000 interest income received from banks and post offices as a deduction from their income thereby making this type of interest income for senior citizens effectively tax exempt up to Rs 50,000.

Earlier, senior citizens were entitled to similar tax-exemption for interest income from bank and post office savings accounts but only up to Rs 10,000 under section 80TTA. The Rs 50,000 deduction was the biggest tax relief announced in Budget 2018 for most senior citizens as they earn most of their income through interest from bank FDs and post office schemes. TDS limit for bank fixed deposit interest was also hiked simultaneously for senior citizens.

Along with that, Budget 2018 increased the limit on health insurance premiums paid that can be claimed as a deduction from income from Rs 30,000 to Rs 50,000 for senior citizens. Additionally, if a senior citizen does not have a medical insurance policy and has incurred medical expenditure during the financial year, then also he/she can claim deduction of up to Rs 50,000 for such expenses under section 80D of the Income Tax Act.

Earlier, a deduction for medical expenditure up to Rs 30,000 was allowed for super senior citizens aged 80 years and above if they were not covered by any medical insurance policy.

For senior citizens suffering from certain critical illnesses, as specified in Rule 11DD of the income tax rules, that are covered under section 80DDB of the Act, deduction limit was raised to Rs 1 lakh for all senior citizens, from the earlier Rs 60,000 (in case of senior citizens) and Rs 80,000 (in case of very senior citizens).

The government has also extended the deadline by which seniors can invest in Pradhan Mantri Vaya Vandana Yojana (PMVVY) to March 31, 2023. The maximum amount that can now be invested in the scheme is Rs 15 lakh from the previous limit of Rs 7.5 lakh as announced in Budget 2018.