Income tax Budget 2024 expectations: 10 ways the finance minister can ease income tax and financial burden of senior citizens

Income tax Budget 2024 expectations: 10 ways the finance minister can ease income tax and financial burden of senior citizens

Finance Minister Nirmala Sitharaman will present the complete budget for the fiscal year 2025 in July. As usual, taxpayers have an extensive list of desired items for the finance minister. Senior citizens make up a significant portion of the tax-paying demographic in India since they also earn income, often in passive ways. Nevertheless, with the rising cost of living, senior citizens might feel that the existing income tax benefits need to be increased.

Three experts tell ET Wealth Online what senior citizens want from the upcoming Union Budget 2024.

Also read: Section 80C deduction in Budget 2024: Will the government increase Section 80C limit under the old income tax regime in Budget?

Suresh Surana, practising chartered account
Increasing the threshold for Mediclaim Premium to Rs 1 lakh: In wake of the global medical concerns arising post covid pandemic, other lifestyle and health issues, it has been observed that senior citizens were the greatest sufferers in this situation. Resultantly, this has led to a steep rise in the medical expenditure as well as health insurance or Mediclaim premiums. The present provisions provide for a deduction of Rs. 50,000 u/s 80D with respect to any Mediclaim premium/ medical expenditure incurred by a senior citizen. Thus, it is expected that the said threshold limit be increased to Rs. 1,00,000.Reducing the age limit for senior citizens u/s 194P from 75 years to 60 years, which provides for exemption from income-tax return filing in certain cases: Section 194P of the IT Act provides for exempting Senior Citizens from filing income tax returns aged 75 years and above subject to certain specified conditions:· Senior Citizen should be of age 75 years or above
· Senior Citizen should be ‘Resident’ in the relevant financial year
· Senior Citizen has pension income and interest income only & interest income accrued / earned from the same specified bank in which he is receiving his pension

Such a benefit may be extended to senior citizens aged 60 years and above to avoid causing them hardship in filing their returns.

Revision and Rationalization of Lock-in Period of holding for specified investments u/s 80C: Certain investments such as fixed deposits with banks or post offices, NSC, Equity Linked Savings Scheme (‘ELSS’) are eligible for deduction u/s 80C subject to the specified lock in periods ranging from 3 (for ELSS) to 5 years (for NSC and fixed deposits). Many senior citizens might be in need of liquid cash for their physical wellbeing, medical care or for other exigencies. Thus, it is expected that the said lock-in timelines would be revised and rationalized for senior citizens.

Increase in the threshold limit for S. 80TTB and applicability of the same to be extended to NSC interest: Section 80TTB of the Income Tax Act allows senior citizens to claim a deduction of up to Rs. 50,000 on interest income earned from deposits held with a specified banking company or a co-operative society engaged in the business of banking or a Post Office. To better support senior citizens significantly relying on investments such as National Savings Certificates (NSCs) for income, it’s essential to extend this deduction to NSC interest. Moreover, considering current inflationary pressures, increasing the deduction threshold to Rs. 75,000 would provide seniors with more financial relief.

Also read: Budget 2024 Section 80D Exemption: Why govt should increase Section 80D tax exemption limit for health insurance under old tax regime

Neeraj Agarwala, Partner, Nangia Andersen India

Deductions for Rent: Senior citizens who do not have income from salaries or business should be provided with a gross deduction for rent paid for housing. By recognizing the unique needs of these retirees, the government can ensure that those without traditional income streams are still supported in maintaining their living arrangements. This measure acknowledges the rising cost of living and rental expenses, providing a sense of security and stability for the elderly population, allowing them to enjoy a comfortable retirement.

Exemptions on Passive Income: Passive income sources such as rent, interest from savings accounts, fixed deposits, bonds, and dividends are crucial for senior citizens. They expect the Finance Minister to introduce higher exemptions or lower tax rates on these income sources, reducing their tax burden and allowing them to retain more of their earnings to better safeguard their financial security.

Exemption from Capital Gains: Senior citizens often rely on their investments in assets such as property, stocks, and mutual funds to generate income in their post-retirement years. By providing exemptions or reduced tax rates on long-term capital gains (LTCG), the government can help senior citizens retain a larger portion of their investment returns, ensuring they have adequate funds to meet their living expenses and healthcare needs. Such tax relief acknowledges the contributions of senior citizens to the economy and society over their lifetimes and encourages them to engage in long-term investments, promoting stability.

Incentivizing Senior Citizen Taxpayers: Incentivizing taxpaying senior citizens with government schemes can greatly enhance their quality of life. By offering targeted benefits such as reduced healthcare costs, subsidized utilities, or exclusive access to senior-friendly financial products, the government can recognize and reward the fiscal responsibility of senior citizens.

Assisted Filing of Income Tax Returns: Offering professional assistance through government-backed programs can ensure that all taxpayers, regardless of their technological proficiency or financial literacy, can file their returns accurately and timely. By facilitating a smoother filing process, the government can enhance taxpayer satisfaction and ensure higher compliance rates, ultimately leading to more efficient revenue collection.

Kumarmanglam Vijay, Partner, JSA Advocates and Solicitors

Currently, the basic exemption limit for senior citizens aged between 60 to 80 years is Rs 3 lakh whereas the exemption limit for citizens above the age of 80 years is Rs 5 lakhs. Considering the increasing costs of living coupled with the fact that nuclear families are on the rise in India, the Government may be looking at increasing these exemption thresholds for senior citizens to allow them to be more self-reliant. The Government should also consider increasing the current limit of Rs 50,000 which is available as a deduction to senior citizens on under Section 80TTB for interest earned by them in a financial year. The Government should also extend the exemption limit of Rs 1 lakh available on long term gains earned on stock market transactions for senior citizens as most rely on passive income for their daily expenses and lifestyle. In order to protect the interest of senior citizens, the Government may also consider incentivizing home buyers to purchase of homes in joint names with their senior citizen parents by allowing a higher deduction on interest payments on the principal amounts. The current limit of Rs 50,000 which is allowed as a deduction under section 80DDB on actual expense incurred in medical treatments should also be increased keeping in mind the increasing health care costs in the country. Also, given the recent phenomenon of new diseases like COVID which impact senior citizens the most, the Government should consider broadening the scope of diseases which are eligible for this deduction.

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