Budget 2024: Will FM Sitharaman offer tax relief to senior citizens to ease burden? Key assumptions 

Union Budget: Union Finance Minister Nirmala Sitharaman will be reading out her full Budget statement for the FY2024-25 on July 23. Every section, including corporate entities and individual taxpayers, is eagerly awaiting potential announcements that have the potential to significantly impact their financial situations. 

Senior citizens especially have been waiting for some tax relief. According to a CNBC Awaaz report, FM Sitharaman could announce three key things in favour of senior citizens. These are:

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1. LTCG tax exemption

The report noted that the NDA government may possibly increase the long-term capital gains exemption limit for senior citizens to Rs 2 lakh from the current Rs 1 lakh. This would offer seniors more financial flexibility, reduce their tax burden on capital gains, and promote continued investment in financial markets.

The base exemption limit for capital gains tax has been elevated to Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens. Consequently, individuals aged 60 years or above with an annual income of up to Rs 3 lakh, as well as those aged 80 years or older with a yearly income of up to Rs 5 lakh, will be exempt from capital gains tax. It’s essential to note that this provision is not applicable to individuals below the age of 60 or Hindu Undivided Families (HUFs), who maintain an exemption limit of Rs 2.5 lakh per annum.

The LTCG tax applies under the following conditions: For properties sold after a holding period of 24 months, a tax rate of 20 percent will be imposed post-indexation.

In the case of shares, equity-oriented mutual funds, and zero-coupon bonds disposed of after 12 months, an LTCG tax rate of 10 percent will apply. Furthermore, for all other capital assets held beyond 36 months, a 20 percent LTCG tax will be applicable. 

2. Tax on house rent

It is expected that there might be a provision for tax deductions on house rent for elderly individuals who do not receive regular pensions. This potential measure could help reduce financial burdens for senior citizens residing in rented accommodations.

3. Deductions on health insurance premiums

The report added that the government may increase the deductions on health insurance premiums for senior citizens. The proposed adjustment seeks to raise the current limit of Rs 50,000 to at least Rs 1 lakh. The current provisions under section 80D allow for a deduction of Rs 50,000 in relation to Mediclaim premium or medical expenses paid by a senior citizen. There is a proposal to increase this threshold limit to Rs 1 lakh.

The proposed change aims to address the escalating healthcare expenses and enhance the availability of medical services for elderly individuals.

Besides these, other expectations are:

4. Lower age limit for ITR exemption

As per Section 194P of the Income Tax Act, individuals who are senior citizens and are aged 75 years or above may be exempt from the requirement of filing income tax returns, subject to specific conditions:

A) The senior citizen should be 75 years of age or older.

B) The senior citizen should be classified as a ‘Resident’ in the relevant financial year.

C) The senior citizen should have income solely from pension and interest sources, with the interest income generated from the same specified bank where the pension is received.

To alleviate the challenges faced by senior citizens in fulfilling their tax obligations, it is proposed that this provision may also be made applicable to individuals aged 60 years and above.

5. Deductions under Section 80C

Certain investments eligible for deduction u/s 80C include fixed deposits with banks or post offices, NSC, and Equity Linked Savings Scheme. These investments have specified lock-in periods, ranging from 3 years for ELSS to 5 years for NSC and FDs. Senior citizens, who may require liquid cash for physical well-being, medical care, or other emergencies, could benefit from a revision and rationalization of these lock-in timelines.

6. Increase in threshold limit for 80TTB

Section 80TTB of the Income Tax Act grants senior citizens the opportunity to avail a deduction of up to Rs 50,000 on the interest income obtained from deposits maintained with a specified banking company, cooperative society involved in banking activities, or a Post Office. 

In order to enhance assistance for senior citizens who heavily depend on investments like National Savings Certificates (NSCs) for their income, it is imperative to include NSC interest within the scope of this deduction. Furthermore, given the prevailing inflationary challenges, elevating the deduction limit to Rs 75,000 would offer senior citizens increased financial respite.

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