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Budget 2024: From Increased Exemption In Mediclaim To Tax-Free Annuities In NPS—4 Items On Seniors’ Wish List

With Budget 2024 round the corner, seniors are hoping for some concession from Union Minister of Finance Nirmala Sitharaman, ranging from increasing the exemption limit for mediclaim, increased tax slabs, and even making the NPS annuity tax-free

July 4, 2024
July 4, 2024
Budget 2024: 4 Demands Government to fulfil to support senior citizens

Budget 2024: 4 Demands Government to fulfil to support senior citizens

The Union Budget 2024 is due this month, and experts and various media reports have compiled senior citizens’ wish lists for Union Finance Minister Nirmala Sitharaman. The common items include higher mediclaim deductions, tax incentives, reduced age limits for income tax return (ITR) filing, and amelioration of Section 80C of the Income-tax Act, 1961.

Also Read: Samagra Pension Portal: Know The Pension Schemes Available, Eligibility And More

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The list could be longer if all the requests are included here. Appeals for tax relief have become louder ahead of the finance minister’s FY2024-25 Budget presentation in parliament.

Mediclaim 

Under the existing provisions, there is a standard medical rebate of Rs. 50,000 for senior and super-senior citizens under Section 80D of the Income-tax Act, 1961. There is also an additional Rs. 40,000 deduction for specific treatments to prevent financial hardships.

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Says Manas Chugh, chartered accountant and consultant at Osgan Consultant: “Under the current provisions, a senior citizen can claim a deduction of up to Rs 50,000 under Section 80D for mediclaim premiums or medical expenses. It is proposed that this limit be raised to Rs 1 lakh to better accommodate the increasing healthcare costs faced by senior citizens.”

Reduce Lock-In Periods

Seniors require more liquidity post-retirement, otherwise they could end up exhausting their accumulated retirement corpus in various emergency situations.

“Section 80C of the Income-tax Act, 1961 specifies lock-in periods for tax-saving instruments, such as fixed deposits (FDs), National Savings Certificate (NSC), and equity-linked savings scheme (ELSS). At present, the lock-in period is five years for both FDs and NSC, and three years for ELSS,” Chugh adds.

He suggests that to provide senior citizens with greater financial flexibility, the government could consider reducing these lock-in periods for individuals over 60 years of age. This change would increase liquidity, thereby enabling seniors to access their funds more readily in case of medical emergencies or other urgent needs.

Also Read: Lending Money After Retirement:3 Things Senior Citizens Should Consider To Avoid Risks

Income Tax Deduction and Tax Slab

Section 80TTB also allows senior citizens to claim a deduction of up to Rs. 50,000 on interest income from deposits in banks, co-operative societies, and post offices.

According to Chugh, to provide further relief to those relying on government instruments for investment purpose, the government could provide an additional benefit of Rs 25,000 for those investing in instruments, such as NSC. Or, the government can also increase the standard deduction to Rs 75,000 for senior citizens.

Experts say there is an urgent need to revise the income tax exemption slabs for seniors, as the current threshold of Rs 3 lakh is inadequate, given the rising costs of living and healthcare.

Tax Exempted Pension

Experts have also pointed out at the taxation of the pension earned through the National Pension System (NPS). “The current taxation policy imposes taxes on all annuities purchased through the NPS corpus and the pension income received by retirees from their accumulated retirement corpus,” Chugh said.

Also Read: Budget 2024: 6 Income Tax Benefits Could Ease Senior Living

He added that both the principal amount and the interest earned on the investment are taxed based on the individual’s applicable income tax slabs or the income bracket.

“To address this issue, there is an expectation that the upcoming Budget will make pensions completely tax-free for senior citizens. Given the lack of comprehensive social security coverage for this demographic, it is proposed that at least the principal component of the pension be exempted from taxation, as the premiums for these pensions are funded through taxable income,” Chugh said.

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