New Tax Regime Deduction for Senior Citizens
Under the New Tax Regime (governed by Section 202 of the Income-tax Act, 2025), taxpayers, including senior citizens, are required to compute their total income without claiming most of the standard exemptions and deductions, specifically those under Chapter VIII of the Act.
Because of this, several tax deductions traditionally beneficial to senior citizens are not allowed under the new tax regime, but the regime offsets this with a higher standard deduction, enhanced family pension deduction, and a higher tax rebate.
Here is the breakdown of how deductions and benefits apply to senior citizens under the New Tax Regime:
Deductions NOT Allowed under the New Tax Regime: By opting for the New Tax Regime, senior citizens forfeit the right to claim the following specific Chapter VIII deductions:
- Health Insurance & Medical Expenditure (Section 126): The deduction of up to ₹50,000 for health insurance premiums or medical expenditures incurred for a senior citizen.
- Interest Income on Deposits (Section 153): The deduction of up to ₹50,000 on interest income earned from savings and time deposits with banks, co-operative societies, or post offices.
- Medical Treatment for Specific Diseases (Section 128): The deduction of up to ₹1,00,000 for medical treatment of prescribed diseases or ailments for a senior citizen.
- Disability Deductions (Section 154 & 127): The flat deductions for a person with a disability or severe disability (₹75,000 or ₹1,25,000) are not permitted.
Deductions and Benefits ALLOWED under the New Tax Regime: While many deductions are removed, the New Tax Regime offers specific enhancements that a senior citizen can claim:
- Higher Standard Deduction on Pension/Salary: A senior citizen receiving a salary or pension and opting for the New Tax Regime is eligible for an enhanced standard deduction of ₹75,000 (or the amount of the salary/pension, whichever is less).
- Enhanced Family Pension Deduction: If a senior citizen receives a family pension, the allowed deduction under the New Tax Regime is increased to one-third of the family pension income or ₹25,000, whichever is less (compared to ₹15,000 in the old regime).
- Higher Tax Rebate (Section 156): Under the New Tax Regime, a resident individual gets a massive tax rebate. If their total income does not exceed ₹12,00,000, they are entitled to a 100% rebate on their payable tax, capped at ₹60,000. This effectively makes income up to ₹12 Lakhs tax-free for those opting for the new regime.