But, if you are a tax-paying senior citizen, this Budget has been incredibly kind to you.

The tax liability of senior citizens to reduce substantially…

People in their golden years primarily rely on the interest from their savings and other investments as income to manage their household budget. Now that inflation is inching up again, senior citizens are facing the maximum brunt of falling interest rates. To offer them some relief, the government has increased the exemption limit of tax-free interest. Unlike the exemption of Rs 10,000 on the savings bank deposit interest allowed until now, in FY 2018-19, the senior citizens——those above 60——will be able to claim exemption of upto Rs 50,000 for the interest earned on bank and post office savings account. This will also include the interest earned on fixed and recurring deposits. Banks and the post office won’t deduct any TDS on such income.

The government has also proposed to extend the Pradhan Mantri Vaya Vandana Yojana up to March 2020—a scheme by which LIC offers assured returns of 8%.. It has also increased the existing investment limit of Rs 7.5 lakh per senior citizen to Rs 15 lakh.

The Budget has proposed a standard deduction of Rs 40,000, instead of separately allowing of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. While young taxpayers won’t benefit much from this proposal, pensioners certainly will. They usually don’t have transport and medical allowance. But since standard deduction is allowed as a blanket deduction, irrespective whether the expenses are incurred, pensioners will be able to reduce their tax liability.

More emphasis on the well-being of senior citizens…

Section 80D provides that a deduction upto Rs 30,000 shall be allowed to an assessee, being an individual or an undivided Hindu family, in respect of payments towards annual premium on health insurance policy, or preventive health check-up of a senior citizen, or medical expenditure of a very senior citizen. The Finance Bill will now amend a href="https://www.personalfn.com/fns/deduction-under-section-80d " style="color:#fd7319" target="_blank">section 80D to raise this monetary limit of deduction from Rs 30,000 to Rs 50,000.

All senior citizens will now be able to claim the benefit of a deduction up to Rs 50,000 per annum for any health insurance premium and/or any general medical expenditure incurred.

Section 80DDB of the Income Tax Act, provides that a deduction is available to an individual and Hindu undivided family with regard to the amount paid for medical treatment of specified diseases in respect of very senior citizen upto Rs 80,000; and in case of senior citizens upto Rs 60,000, subject to specified conditions.

The Budget 2018 has raised the limit of deduction for medical expenditure for specific critical illness from, Rs 60,000 (for senior citizens) and from Rs 80,000 (for very senior citizens), to Rs 1 lakh for all senior citizens, under section 80DDB.

Senior citizens who can’t afford to buy health insurance will now enjoy the benefits of the flagship programme of the government—The National Health Protection Scheme. Under this scheme, the government intends to offer the cover of Rs 5 lakh per family per year for secondary and tertiary care and hospitalisation.

On the flip side, the proposal to tax Long Term Capital Gains (LTCG) made on all equity investments at 10%, may affect the returns senior citizens make on their equity investments including mutual funds. Nonetheless, the exemption on first Rs 1 lakh may negate the impact to an extent. Do you agree, tax planning is an essential exercise for all? A rupee saved is a rupee earned!

If you believe in this, you should download PersonalFN’s Comprehensive Tax Planning Guide. It will show you how you can save your hard earned money from tax deductions, and reduce your tax burden quickly and smartly.

Editor's note: Do you agree, tax planning is an essential exercise for all? A rupee saved is a rupee earned! If you believe in this, you should download PersonalFN’s Comprehensive Tax Planning Guide. It will show you how you can save your hard earned money from tax deductions, and reduce your tax burden quickly and smartly.

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