Budget 2018: Six Biggest Benefits for Senior Citizens

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Budget 2018, six biggest budget benefits for senior citizens announced by our Finance Minister Arun Jaitley in Parliament on 1 February. Biggest beneficiaries of budget 2018 are senior citizens. The budget doesn’t offer any relief to high-income taxpayers and reintroduced standard deduction which will have limited impact due to the removal of tax-free medical & transport allowances.

“A life with dignity is a right of every individual in general, more so for the senior citizens. To care of those who cared for us is one of the highest honors” were the words of Jaitley.

And with the objective of providing a dignified life to senior citizens, he announced six tax reliefs & incentives for them in his union budget 2018.

Benefits of Budget 2018:  Six Reliefs to Senior Citizens

1. Health insurance premium and/ or Medical expenditure u/s 80D –

The deduction limit of health insurance premium and/ or medical expenditure u/s 80D has been raised from Rs. 30,000/- to Rs. 50,000/-. Earlier the deduction limit available u/s 80D was Rs. 30,000/- p.a. However, now all senior citizens will be able to claim the benefit of Rs. 50,000/- p.a. as the deduction for health insurance premium and/or medical expenditure.

2. Medical expenditure in respect of certain critical illness u/s 80DDB –

For medical expenditures made in respect of certain critical illness, u/s 80DDB Rs. 1 lakh is available as a deduction in respect of all senior citizens. Which was earlier Rs. 60,000 (in case of senior citizens) and Rs. 80,000 (in case of very senior citizens).

Specified Diseases u/s 80DDB

For the purpose of section 80DDB, the following diseases have been specified under rule 11DD:

  • Neurological diseases where the disability level has been certified to be of 40% and above
  • Malignant cancers
  • Full Blown acquired Immuno-Deficiency Syndrome (AIDS)
  • Chronic Renal failure
  • Hematological disorders

3. Interest income on banks or post offices schemes u/s 80TTB –

Budget 2018 introduced New section 80TTB. According to which interest income earned on banks or post offices schemes will be exempt till Rs. 50,000/-. However existing deduction of Rs. 10,000 can’t be claimed u/s 80TTA if one opts deduction u/s 80TTB.

4. TDS on Interest income earned on deposits u/s 194A –

As per Budget 2018, Interest income on deposits with banks and post offices is exempted up to Rs. 50,000/- and TDS will not be deducted from such income u/s 194A. However, the same benefits will also be available for interest income from all fixed deposits schemes and recurring deposit schemes. Similarly, which means in case the interest income exceeds Rs. 50,000/- then TDS will be deducted on the amount exceeding Rs. 50,000/- at the rate of 10% and the assessee will need to file his Income tax return to get the tax deducted as a refund.

5. Investment in Interest-bearing LIC Schemes doubled from Rs. 7.5 lakhs to Rs. 15 lakhs –

Pradhan Mantri Vaya Vandana Yojana is introduced by Government of India for senior citizens and very senior citizens. LIC of India has been given the sole privilege to operate this scheme. The Pradhan Mantri Vaya Vandana Yojana has been launched on 4th May 2017. This scheme was available for one year from date of launch.

In Budget 2018 Pradhan Mantri Vaya Vandana Yojana is extended up to March 2020. Under which LIC of India will give 8% of the assured return. And also enhanced the limit on investment per senior citizen from existing Rs. 7.5 lakhs to Rs. 15 lakhs under this scheme.

This scheme is available offline as well as online. To Purchase this scheme online please log on to website www.licindia.in.

6. Standard Deduction of Rs. 40,000 –

In addition to the above incentives he also proposed standard deduction of Rs. 40,000/-. Which means the same will be allowed as an exemption in respect of transport allowance and medical reimbursement to provide relief to salaried taxpayers and pensioners. This decision to allow standard deduction shall significantly benefit the pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses. However, the revenue cost of this decision is approximately Rs. 8,000 crores. Thus the total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crores.

As a matter of fact, the above tax benefits for senior citizens will be applicable from FY 2018-19 i.e. AY 2019-20 onwards.

Income Tax Slabs Rate for AY 2019-20

There are no changes in the slab rate it will remain the same as earlier but there is an increase in education & healthcare cess chargeable to taxable income.

  • For Senior Citizens (Age between 60 & 80 years):

Total Income Rate

Income Tax Slab Rate

Up to Rs. 3,00,000 Nil
Rs. 3,00,000  to Rs. 5,00,000 5%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Surcharge

If total income exceeds Rs. 50 Lakhs but below Rs. 1 crore 10% on Income Tax
If total income exceeds Rs. 1 crore 15% on Income Tax

Cess

Health Cess 1% on Income tax + surcharge
Education Cess 2% on Income tax + surcharge
Secondary & Higher Education Cess 1% on Income tax + surcharge

Rebate u/s 87A

Rs. 2,500 or Income tax whichever is lower for Individuals having income up to Rs. 3,50,000
  • For Very senior Citizens (Age above 80 years):

Total Income Rate

Income Tax Slab Rate

Up to Rs. 5,00,000 Nil
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Surcharge

If total income exceeds Rs. 50 Lakhs but below Rs. 1 crore 10% on Income Tax
If total income exceeds Rs. 1 crore 15% on Income Tax

Cess

Health Cess 1% on Income tax + surcharge
Education Cess 2% on Income tax + surcharge
Secondary & Higher Education Cess 1% on Income tax + surcharge

Budget 2018 was the first budget after Goods & Services Tax implementation. Jaitley also gave significance to Agriculture & Rural economy, MSMEs, Employment, Infrastructure & Financial Sector Development in Budget 2018.

Although Jaitley disappointed salaried taxpayers, on the other hand, he introduced many tax exemptions for senior citizens. As per Jaitley’s speech, these concessions will give extra tax benefit of Rs. 4,000 crores to senior citizens. While this was the last full budget of Narendra Modi’s government before 2019 Lok Sabha Elections. And above-mentioned reliefs are for all senior citizens. Same deduction limit will be applicable for both senior citizens and very senior citizens. As a result, it signifies no distinction between senior citizens and very senior citizens.

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