May 30, 2025 - The Central Board of Direct Taxes (CBDT) has rolled out new guidelines aimed at providing tax benefits to retired individuals. These measures have been taken as part of the government's continued efforts to support the older population financially and will address healthcare costs, interest income and ease up filing procedures for senior citizens.

A new brochure published by the Income Tax Department outlines the tax advantages available to retired workers in the public and private sectors under the Income Tax Act of 1961. The brochure, which is intended for individuals 60 years of age and older, describes the tax treatment of several retirement-related payments, including interest income, pensions, gratuities and withdrawals from provident funds.

The benefits include deductions for health insurance and special provisions for interest income and exemptions.

Those aged 80 and above, can file their IT manually if their income exceeds Rs 5 lakh or if a refund is due.

Recognising the increased healthcare costs often faced post-retirement, the government has allowed retired individuals to now claim a deduction of Rs 50,000 under Section 80D for health insurance premiums or medical expenses. Furthermore, Section 80DDB provides additional financial relief for medical expenses by permitting a deduction of up to Rs 1 lakh for the treatment of specific ailments.

Retired tax payers now will be able to avail of a deduction of up to Rs 50,000 under Section 80TTB for interest income earned from banks, post offices, or cooperative banks. No TDS will be applicable for the retired income-tax payee whose annual interest income remains below this limit. 

Amount received under the Reverse Mortgage Scheme will not be put in the bracket of capital gains, as per special provisions, thus allowing tax exemption. 

For tax purposes, age 60 to below 80 are classified as senior citizens, while those 80 and above are considered super senior citizens.

The new guidelines will not only help save the disposable income for retirees but also aim to cut down on the hassles of tax filing, etc. Therefore, when filing income tax returns for Assessment Year 2025-26, senior citizens should be aware of the latest rules and updated forms issued by the Income Tax Department.

With Media Inputs