Our member, Mr Amalendu Mukherjee, summarises how Union Budget 2018 may impact senior citizens.
The Union Budget of 2018 has many proposals that will cheer up senior citizens as it provides several tax benefits. These include an increase in the tax exemption limit for interest income from banks and post offices as well as an increase in tax breaks on health insurance and medical expenditure. These will bring a great deal of relief to senior citizens, as most of them derive all or a major part of their income from bank FDs and post office schemes. They will stand to enjoy higher exemption on interest income on bank and post office deposits.
Tax Relief & Extended Saving Scheme for Senior Citizens
The biggest announcement of this Budget is that all senior citizens can claim the benefit of deduction upto ₹50,000 per year with respect to any general medical expenditure and health insurance premium. In FY 2017-18, this deduction limit for health insurance premium was ₹30,000 under section 80D.
Fixed Deposits and Post Office Deposits
Another major announcement is that there will be no TDS (Tax Deducted at Source) on Fixed Deposits in banks and post offices on interests up to ₹50,000 for senior citizens. The limit earlier was ₹10,000.
The tax deducted at source (TDS) is not required to be deducted under section 194A. The benefit will also be available on interest from all fixed deposit (FD) and recurring deposit (RD) schemes.
Medical expenditure for critical illness
An additional increase in deduction limit for medical expenditure for certain critical illnesses under section 80DDB has been raised to ₹1 lakh from ₹60,000 for all senior citizens and ₹80,000 for very senior citizens (80 years and above).
Under 11DD of income tax rules, certain critical illnesses include neurological diseases where the disability is more than 40%, cancer, AIDS, chronic renal failure and haematological disorders. The certificates of these diseases need to be certified by eligible specialists.
Pradhan Mantri Vaya Vandana Yojana
Government has launched the Pradhan Mantri Vaya Vandana Yojana (PMVVY) to provide income security during old age and to protect senior citizens against future fall in their interest income due to uncertain market conditions. Life Insurance Corporation (LIC) implemented this scheme for senior citizens (over 60 years of age) by providing assured pension, with a guaranteed return of 8% per annum for ten years.
Under the Pradhan Mantri Vaya Vandana Yojna, the amount on which there is an assured interest of 8% per annum has been raised from 7.5 lakh to 15 lakh maximum investment policy and the scheme extended has been upto March 2020.
To avail the income tax benefits senior citizen tax payers must submit their income tax returns within a specified time-limit.
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