Finance Minister Arun Jaitley in Budget 2018 announced many changes in income tax laws which will help reduce the tax burden on senior citizens. The Finance Act, 2018 has inserted a new Section 80TTB under Income Tax Act, 1961. Senior citizens will get higher interest income exemption limit on deposits in banks and post offices, including recurring deposits. Currently, a deduction up to Rs. 10,000 is allowed under Section 80TTA of the Income Tax Act to an individual in respect of interest income from a savings account.
Under the tax laws, a new Section 80TTB has been inserted to allow a deduction up to Rs.50,000 in respect of interest income from deposits held by senior citizens. However, no deduction under Section 80TTA shall be allowed for senior citizens.
This extra deduction is applicable with effect from Assessment Year 2019-20 (financial year 2018-19).
Srinivasan Anand G of Taxmann, says it does not matter whether deposit with bank or post office in question was made before or after April 1, 2018. Interest income is deductible only if it is from deposits with a bank or co-operative bank or post office, he says.
The deduction for senior citizens under Section 80TTB is applicable irrespective of the type of deposits, savings or fixed or recurring, says Mr Anand. Deduction is available even if interest is from a five-year tax saver fixed deposit with bank on which Section 80C availed in the past, he adds. Deduction can also be availed in respect of a 5-year post office time deposit in respect of which Section 80C has been claimed in past.
But deduction in respect of interest income from deposits with companies or NBFCs is not allowed under this section, Mr Anand adds.
Rs. 40,000 standard deduction: This additional deduction will replace existing deductions of Rs. 19,200 for transport allowance and Rs. 15,000 for medical reimbursement. This will benefit 2.5 crore salaried employees. Pensioners, who are mostly senior citizens and normally do not enjoy any allowance for transport and medical expenses, will also benefit from it.A fter the introduction of standard deduction, they will enjoy a flat deduction of Rs. 40,000 from their taxable income. However, those drawing family pension will continue to get standard deduction up to Rs. 15,000 as no amendments have been made to Section 57(iia) to increase it to Rs. 40,000.
Higher deduction limit under Section 80D of the Income Tax Act for senior citizens: This relates to increase in deduction for senior citizens on payment of health insurance premiums. The deduction limit has gone up from Rs. 30,000 to Rs. 50,000.
Section 80D provides that a deduction up to Rs. 30,000 shall be allowed to an assessee, being an individual or a Hindu undivided family, in respect of payments towards annual premium on health insurance policy, or preventive health check-up, of a senior citizen, or medical expenditure in respect of very senior citizen (aged 80 or above). The overall limit of these deductions is Rs. 30,000. The Section has been amended with effect from assessment year 2019-20 to extend the deduction to cover medical expenditure in respect of senior citizen (aged 60 or above) and overall limit raised from Rs. 30,000 to Rs. 50,000. For individuals below 60 years of age, the deduction under Section 80D continues to be Rs. 25,000. But if their parents are senior citizens, above 60 years, they can claim an additional deduction up to Rs.25000 in respect of mediclaim insurance premium on their lives and/or medical expenditure incurred on them so that total deduction up to Rs. 50,000 can be claimed.
Higher income tax deduction for senior citizens for medical treatment of specified diseases: The deduction available payment towards medical treatment of specified disease has been hiked to Rs. 1 lakh for very senior citizen (earlier Rs. 80,000) and senior citizen (earlier Rs. 60,000).
Higher TDS or tax deducted limit for senior citizens: The threshold for deduction of tax at source on interest income for senior citizens is proposed to be hiked from Rs. 10,000 to Rs. 50,000.
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