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Monday, June 11, 2018

Income Tax - Benefits for Senior Citizens and other important Points for FY 2018-19

Basic Exemption Limits

For ordinary individual taxpayers the basic exemption limit, from payment of Income Tax is Rs. 2.50 Lakhs. However for resident senior individual citizens who have completed the age of 60 years and yet to complete 80 years the limit is Rs. 3 lakhs. For resident individual taxpayer over 80 years does not have to pay any tax up to Rs. 5 lakh annual income.

Deduction under Section 80D 

For all senior citizens deduction up to Rs. 50,000/- for health insurance premium can be claimed by themselves or their children. From current year, in case the senior citizen does not have any medical insurance, a deduction up to Rs.50,000/- can be claimed for any medical expenses including day to day expenses as well as for hospitalization based on Bills and receipts, Medical prescription. Earlier this benefit was available to only for the senior citizens who had completed 80 years of age. Important Condition is that the Senior Citizen should not have any health insurance coverage.

Deduction under Section 80 DDB

An individual can claim up to Rs 40,000/- for the treatment of Specified Critical ailments. This can also be claimed on behalf of the dependents. In case of a senior citizen (60 age years or more) then the deduction up to Rs 100,000/- is allowed. Now the deduction can be allowed on the basis of a prescription from an oncologist, a urologist, nephrologist, a haematologist, an immunologist or such other specialist. 

Standard Deduction: 

In case of salaried persons, Standard Deduction of Rs.40000 is allowed. This is applicable to pensioners also. 

Deduction for interest from Banks and Post Office under Section 80 TTB 

Up to last year a deduction up to Rs. 10,000 was available in respect of interest from saving bank account under Sec 80 TTA. Now Section 80 TTA benefits would be applicable only for NON-Senior Citizens. From current year,  the senior citizens can claim the deduction only under 80 TTB, for saving bank interest plus Other Deposit interest up to Rs. 50,000/- in a financial year. From current year senior citizens will be able to claim an enhanced deduction on fixed deposits + SB Interest+ Interest on the deposits made under Senior Citizen Savings Scheme(SCSS).

So a senior citizen has to submit form No.15H, to claim exemption from TDS, only when such aggregate annual interest from Term Deposits ( including RD) exceeds Rs.50,000 in a year. Eligibility to submit 15 H - If the Tax Liability would be Nil i.e. If the aggregate annual taxable income would not exceed Rs 300,000/- (after taking in to account Standard deduction and other eligible deduction like 80C, 80 D, 80 TTB etc) e.g. if the  Annual Pension Income is 3,60,000, Annual interest income  2,00,000/- and  eligible Deductions, under 80 C is 1,50,000/-, Under 80 D is Rs 30,000/-, 80 TTA is Rs 50,000/- and Standard Deduction is Rs 40,000/- . Total taxable income falls below Rs300,000/- and the Senior Citizen can file 15 H. 

Other Important  Points:

  1. 3% Education cess to be replaced with Health & Edu.cess @ 4% for all taxpayers
  2.  Pradhan Mantri Vaya Vandana Yojana is extended up to March 2020 under which has an assured return of 8% is given by Life Insurance Corporation of India. The existing limit on investment of Rs7.5 lakh per senior citizen under this scheme is also being enhanced to Rs15 lakh.
  3. Exemption from Payment of advance tax - In cases when tax liability after reducing the amount of TDS is more than Rs. 10,000/- in a year, advance tax has to be paid  in four instalments. However senior citizens are exempted from requirement of payment of advance tax provided they do not have any income under the head “Profits and Gains of Business or Profession”. The senior citizen can discharge their tax liability at the time of filing their ITR.
  4. Under Sec 87 A , Resident Individuals can claim rebate , when Taxable Income after all deductions falls below Rs 350,000/- The rebate is limited to Rs 2,500. Which means if the total tax payable is lower than Rs 2,500, such lower amount of tax will be the rebate under section 87A. This rebate is applied on total tax before adding Education Cess (4%).
  • Question: What is the permissible limit for preventive health check-up by the pensioner? What are the conditions?
  • Any payment on account of preventive health check-up of the pensioner /Spouse of Pensioner restricted to Rs 5000/-. Cash payment allowed here. The aggregate amount of deduction including premium should not exceed Rs 50,000.
  • Question: Whether a Salary class individual can take medical insurance cover for his/her parents, who are Senior Citizens,  and claim exemption while filing his/her IT Return? For claiming the benefits whether Is it necessary that parents of the insured are to be dependent
  • Additional deduction under section 80D can be claimed irrespective of the fact whether parents are dependent or not. Example: An individual pays (through any mode other than by cash) during the FY 2018-19 medical insurance premiums as under: 
  • a) Rs 17,000 for himself, his wife and dependent children b) Rs 40,000 for his parents, who are not dependent. c) According to above provisions, he will be allowed deductions of Rs. 42,000 (17,000 + 25,000) if neither of his parents are senior citizens. However i,f any of his parent is a senior citizen, he will be allowed a deduction of 57,000 (17,000+40,000).
Further, in the above example, if total premium on parents (not senior citizens) is 40,000 out of which Rs 27,000 is paid by the son and Rs 13,000 by the father out of their respective taxable income, the son will get deduction of Rs 25,000 (in addition to deduction of Rs 17,000 for the medical insurance on self and family) and father will get deduction of Rs 13,000.
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