Budget 2018 was a good budget for Senior Citizens of the country and provided much-needed relief. For income tax purpose, any citizens with age of 60 years or more are considered as the senior citizen. We discuss the new income tax benefits for senior citizens below:
1. Rs 50,000 Tax exemption on Interest Income from Fixed Deposits and Recurring Deposits u/s 80TTB:
The interest rates had come down drastically in the last few years and most senior citizens depend on fixed deposits for their regular income. The tax exemption of Rs 50,000 interest income from Post office or Banks under section 80TTB is good move to compensate for the same. However, if you take benefit u/s 80TTB then you cannot claim tax benefit on interest received on savings bank account u/s 80TTA. This will lead to saving of Rs 2,600 for 5% tax slab, Rs 10,400 for 20% tax slab and Rs 15,600 for 30% tax slab.
2. Standard Deduction for Pensioners:
Budget 2018 has introduced a standard deduction of Rs 40,000 for both salaried and pensioners. For salaried, this is not much beneficial as medical reimbursement and transport allowance have been abolished. But as pensioners did not have these allowances, Rs 40,000 is a straight deduction for them!
3. Medical Insurance premium exemption increased u/s 80D:
The Medical Insurance premium and the preventive health check-up limit for senior citizens under section 80D has been increased from Rs 30,000 to Rs 50,000. This is good news in keeping with the ever increasing health care and related insurance costs.
4. Deduction for medical treatment of critical illnesses increased u/s 80DDB:
The deduction for medical treatment of specified critical illnesses has been increased to Rs 1 Lakh. Earlier the limit was Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens.
Following illness are covered under section 80DDB:
- Neurological Diseases
- Parkinson’s Disease
- Malignant Cancers
- Chronic Renal failure
5. Interest TDS threshold raised to Rs 50,000 u/s 194A
There is TDS (tax deduction at source) for almost all kind of income. However, as a relief to senior citizens, Budget 2018 has raised the limit for TDS from Rs 10,000 to Rs 50,000. So TDS would only be applicable for senior citizens if the annual interest income from a bank/post office is more than Rs 50,000/-.
LIC Pradhan Mantri Vaya Vandhana Yojana extended:
Pradhan Mantri Vaya Vandhana Yojana is a government-backed pension scheme for senior citizens offering 8% returns. This scheme has now been extended till March 2020. Also, the investment limit has been doubled from Rs 7.5 lakhs to Rs 15 lakhs. This is a good scheme for senior citizens in the lower tax bracket. But remember Senior Citizen Savings Scheme still offers higher interest rate but with shorter lock-in.