For the elderly, rising cost of living and medical expenses poses great difficulties. Senior citizens had lot of expectations from the Union Budget 2020 that would address these concerns and enable them to lead a life of personal and financial freedom.

Some of the expectations were as listed below:

• Raising the basic exemption limit on income tax

• Higher exemption limit under Sec 80D of Income Tax Act for health insurance premium/medical expenses

• Tax rebate on interest from Senior Citizen Saving Scheme

• Tax exemption on interest income

• Dedicated funds and self-employment opportunities

• Better safety of deposit

[Read: Budget 2020: Measures That Can Provide Relief to Senior Citizens]

While most of the above mentioned expectations were unmet, the government offered some relief in the following ways:

Enhanced allocation

Finance Minister Ms Nirmala Sitharaman in her budget speech said that the government is mindful of the concerns of senior citizens and Divyang. Accordingly, it has provided for an enhanced allocation of about Rs 9,500 crore for 2020-21. If utilised appropriately and in a timely manner, this allocation can prove beneficial for the elderly.

Healthcare measures

The government proposed to expand the Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024. The health sector was allocated Rs 69,000 crore, including Rs 6,400 for Ayushman Bharat Yojana. These medical/healthcare facilities will be beneficial to all, including senior citizens for whom the rising cost of healthcare inflation is one of the biggest concerns.

Deposit insurance coverage hiked

Banks deposits are the most favoured investment avenue of senior citizens as they prefer safety of deposit over capital appreciation. In the past, there have been instances of financial crisis at banks which had led to RBI imposing withdrawal restrictions on its customers. Senior citizens, many of whom had their life time worth of saving locked away in bank deposits, could not access their own money. To revive the faith of depositors, especially senior citizens, the deposit insurance coverage for depositors has been increased to Rs 5 lakh from the current Rs 1 lakh.

New tax regime

The government has proposed a new income tax regime whereby individuals can opt for lower tax rate by foregoing deductions and exemptions available under the Income Tax Act. As per the new tax regime, basic income tax exemption limit for senior and super senior citizens will be equal to that of non-senior citizens, i.e. Rs 2.5 lakh instead of the earlier Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens. Individuals aged over 60 years would therefore get more tax relief in the old tax regime if their income is up to Rs 5 lakh.

Table 1: Income Tax rate applicable to senior citizens under old and new tax regime

(Source: PersonalFN research, indiabudget.gov.in)

Senior citizens earning more than Rs 5 lakh will need to calculate tax outgo under new and old tax regime to determine which will be more beneficial to them.

[Read: Budget 2020 and Its Impact on Your Personal Finance]

For example, a senior citizen with an income of Rs 10 lakh would break-even (tax outgo will be same in both new & old regime) if he/she claims deduction of Rs 1.75 lakh. If the person claims deduction higher than Rs 1.75 lakh than the tax outgo would be lower in case of old tax regime. Similarly, there would a different break-even for every income level.

Table 2: Will the new tax regime reduce your tax outgo?

	Old Tax Regime	New Tax Regime
Gross Income	10,00,000	10,00,000
Deductions:
U/Sec: 80C	1,50,000	--
U/Sec: 80D	25,000	--
U/Sec: 24(b)	--	--
Taxable Income	8,25,000	10,00,000
Tax Slab (OLD)
0 to 3 Lacs	--	--
3 to 5 Lacs @ 5%	10,000	--
5 Lacs to 10 Lacs @ 20%	65,000	--
> 10 Lacs @ 30%	--	--
Tax Slab (NEW)
0 to 5 Lacs	--	--
2.5 to 5 Lacs @ 5%	--	12,500
5 to 7.5 Lacs @ 10%	--	25,000
7.5 Lacs to 10 Lacs @ 15%	--	37,500
10 Lacs to 12.5 Lacs @ 20%	--	--
12.5 Lacs to 15 Lacs @ 25%	--	--
> 15 Lacs @ 30%	--	--
Income Tax	75,000	75,000
Cess @ 4%	3,000	3,000
Total Tax Outgo	78,000	78,000

(Source: PersonalFN research)

However, for senior citizens earing Rs 15 lakh or more, there is no difference in tax rate applicable under new and old tax regime. Taxpayers in such an income group are likely to benefit from the new tax regime.

Table 3: Individuals in the highest tax bracket are likely to benefit from the new tax regime

	Old Tax Regime	New Tax Regime
Gross Income	18,00,000	18,00,000
Deductions	20,00,000	--
Total Tax Outgo	3,01,600	2,88,600

(Source: PersonalFN research)

The new tax regime aims to simplify the tax structure. The government will review and rationalise the remaining exemptions and deductions in the coming years with a view to further simplify the tax system and lower the tax rate.

As per the Budget speech, the new tax regime shall be optional for the taxpayers. An individual who is currently availing more deductions & exemptions under the Income Tax Act may choose to avail them and continue to pay tax vide the old regime.

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Comments
rajeshrivastava rediffmail.com Feb 08, 2020 Thanks for making us aware in such a simple manner.
rajeshrivastava rediffmail.com Feb 08, 2020 Thanks for making us aware in such a simple manner.
cyrilcdsouza@rediffmail.com Feb 09, 2020 What about Rs.50,000 if one is pensioner and Rs.50,000 deduction of FD interest under old scheme under TTD. If this is taken into account for dedution, the incidence of tax under old scheme will be less.

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