The Union Budget 2024 is due this month, and experts and media reports have compiled a wish list for Union Minister of Finance Nirmala Sitharaman.

The list includes a senior-focused wish list, including higher mediclaim deductions, tax incentives for seniors, reduced age limits for filing of income tax returns (ITR), and amelioration of Section 80C of the Income-tax Act, 1961.

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The list could be longer if people from all backgrounds are included. Before the finance minister presents her FY2024-25 Budget in Parliament, public appeals for tax relief have been reported in various media reports, too

Mediclaim 

Under the prevailing 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 amount of Rs. 40,000 to those having specific operations and treatments to prevent financial hardships.

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.

More Flexible Investments

The flexibility or liquidity of an investment is one of the factors to consider before investing in any instrument. Seniors require more liquidity, otherwise they could end up exhausting their accumulated retirement corpus for medical emergencies.

“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.

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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, in order 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.

According to many experts, there is an urgent need to revise the income tax exemption limits for senior citizens, 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.

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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.