What Senior Citizens Expect from Nirmala Sitharaman in Budget 2024

It's important to note that a significant segment of India's tax-paying population comprises senior citizens, relying predominantly on pension and interest income. With the increasing expenses associated with living and healthcare, these senior citizens express dissatisfaction with the inadequate income tax benefits. They expect a range of measures in the upcoming Budget that would provide added tax benefits.

In the 2023-24 Budget, the Finance Minister suggested increasing the upper deposit limit for the Senior Citizen Saving Scheme (SCSS) from Rs 15 lakh to Rs 30 lakh. Likewise, the maximum deposit limit for the Monthly Income Plan saw an increase from Rs 4.5 lakh to Rs 9 lakh and, in the case of a joint account, from Rs 9 lakh to Rs 15 lakh.

However, a large number of senior citizens were not satisfied with the Budget 2023 as the expectations from the government in terms of senior citizens were not met.

Here are a few prevalent expectations of senior citizens from the forthcoming Union Budget for the financial year 2024-25:

1. Higher Income Tax Exemption Threshold for Senior Citizens:

Senior citizens are eagerly expecting a higher Income Tax exemption threshold in the 2024 Budget under Finance Minister Nirmala Sitharaman. The current threshold is viewed as insufficient to cope with the increasing cost of living and healthcare expenses faced by the elderly population. Besides, many senior citizens do not have a regular source of income, and they often rely on their savings, interest, and/or returns earned on their investments. The elderly population typically prefer investing in traditional financial instruments like bank fixed deposits. With low interest rates on these instruments, this segment of senior citizens has been hit hard. This is why seniors have been advocating for an increase in the exemption limit, providing them with relief and improved financial stability.

Currently, the basic tax exemption limit is Rs 3 lacs for senior citizens (above 60 years of age) and Rs 5 lacs for very senior citizens (above 80 years of age). This is the limit up to which senior citizen's income is not subject to tax. Now, the demand is that the Budget should revise the basic tax exemption threshold for senior citizens (over 60 years of age) from Rs 3 lakh to Rs 5 lakh in the New Tax Regime, at par with that of very senior citizens (over 80 years of age).

A higher threshold would acknowledge the unique financial challenges seniors encounter during retirement and contribute to enhancing their overall well-being. This expectation aligns with the broader goal of recognising the valuable contributions of senior citizens to society by facilitating a more comfortable and economically viable life in their later years. It reflects a collective desire for policies that prioritise the financial welfare of this crucial demographic.

2. Tax-free Pensions for Senior Citizens:

Currently, tax is levied on all annuities purchased through the National Pension System (NPS) corpus or the pension income received by retirees from their accumulated retirement corpus. Both the principal amount and the interest earned are subject to taxation based on the individual's applicable income tax slabs.

To address this, there is an expectation from the upcoming Budget to render pensions completely tax-free for senior citizens. Given the absence of social security coverage for this demographic, some senior citizens expect to allow at least a deduction for the principal component, as pension premiums are already funded through taxable income.

The long-standing demand, supported not only by senior citizens and life insurance companies but also by the Pension Funds Regulatory and Development Authority (PFRDA), seeks the exemption of at least the principal component from taxation, with expectations for this demand to be met in the Budget 2024.

3. A Higher Limit for Tax Deductions under Sections 80C and 80TTB:

Section 80C of the Income Tax Act, 1961 includes various deductions for savings and investments, allowing up to Rs 1.5 lakh annually for investments in instruments such as ELSS in mutual funds, Public Provident Fund (PPF), National Savings Certificate, Senior Citizen Savings Scheme, 5-year term deposit, etc.

The maximum deduction limit of Rs 1.5 lakh has remained unchanged for the past 9 years. Hence, senior citizens are expecting an increase in this limit in the upcoming 2024 Budget. An additional relief of Rs 50,000 for senior citizens aged 60 and above, supplementing the current limit of Rs 1.5 lakh, is expected. Extending the tax deduction limit in the New Tax Regime will encourage seniors to opt for it.

Investments eligible for deduction under Section 80C, such as ELSS, NSC, and fixed deposits, are subject to specified lock-in periods ranging from 3 to 5 years. Recognising that senior citizens may need liquid funds for their well-being, medical care, or emergencies, the Budget is expected to revise and rationalise these lock-in periods for senior citizens.

Section 80TTB permits senior citizens to claim a tax deduction of up to Rs 50,000 on interest income from bank fixed deposits and post office savings accounts. However, this threshold has remained unchanged for the past 6 years and needs adjustment based on the current rate of inflation. Therefore, in the Union Budget 2024, senior citizens expect an increase in the existing tax deduction limit under Section 80TTB from Rs 50,000 to Rs 75,000.

4. Tax-free Investment Options for Senior Citizens:

Senior citizens are urging for tax-free investment options in the Union Budget 2024 by Miss Sitharaman. Currently facing tax implications on various investment avenues, seniors seek relief to enhance their financial well-being. The demand is for tax exemptions on investments such as fixed deposits, mutual funds, and other financial instruments, providing senior citizens with more flexibility and better returns on their savings. This expectation aligns with their desire for financial security and improved income during retirement, fostering a more favourable environment for elderly investors in the Indian economy.

5. Higher Tax Deduction under Section 80D on Health Insurance Premiums for Senior Citizens:

Health insurance is a necessity for senior citizens and the COVID-19 pandemic has prompted many of them to proactively secure health coverage. Having said that, health insurance premiums have also seen an upward trajectory since the pandemic. As of now, senior citizens enjoy a deduction of Rs 50,000 under Section 80D for health insurance premiums.

However, considering the increasing uncertainties and soaring healthcare costs, this amount is perceived as insufficient. Senior citizens are expecting an increase in the deduction limit under Section 80D from Rs 50,000 to Rs 75,000.

Section 80DDB offers individual taxpayers and Hindu Undivided Families (HUFs) a deduction for medical expenses related to the treatment of specified diseases. Senior citizens are eligible to claim up to Rs 1 lakh under Section 80DDB, subject to specific conditions for themselves or dependents, encompassing spouses, children, parents, brothers, and sisters. Nevertheless, given the significant escalation in medical expenses over time, senior citizens expect a further increase in this limit.

6. Reduction in Age Limit for Senior Citizens to Be Exempt from Filing ITR:

Section 194P of the Income Tax Act provides an exemption from filing income tax returns for senior citizens aged 75 years and above, subject to specific conditions:

- The senior citizen must be 75 years or older.

- The senior citizen should be a 'Resident' in the previous year.

- Senior citizens should have only pension and interest income.

- The interest income should be accrued/earned from the same specified bank where the pension is received.

Filing income tax returns proves challenging for many senior citizens due to the complex process, documentation hassles, and a general aversion to technology. There is an expectation that the Union Budget 2024 will reduce the minimum age limit for senior citizens from 75 years to 65 years, alleviating them from the obligation of filing returns.

Furthermore, it is suggested that the process of claiming tax refunds for senior citizens with no taxable income be simplified. This is deemed feasible given the increased use of technology and the data available to the Income Tax Department.

7. Bonus Schemes for Senior Citizens:

Senior citizens are hopeful for possible bonus schemes and tax incentives in the upcoming 2024 Budget. The expectation is grounded in the need for additional financial support for the elderly population. Bonuses tailored for seniors could provide a direct injection of funds, helping to address the rising costs associated with healthcare, daily living, and other essential expenses. This would not only increase the financial security of senior citizens but also acknowledge their contribution to society.

So, these are some common expectations of senior citizens for the forthcoming Union Budget for FY 2024-25. By addressing the economic challenges of the seniors, the government can empower and uplift the elderly community, ensuring a more dignified and comfortable life during their retirement years. However, as this Budget is a 'Vote on Account', whether these expectations will be fulfilled or not will be unveiled on February 01, 2024.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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