Union Budget 2021 India: Approach to taxation of senior citizens needs special consideration and focus on various aspects. Here is a look at what the FM can do for them in the Budget.
Senior citizens need to have a respectable level of assured returns on their investments to enable them to be financially independent during their ripe age.
Union Budget 2021-22 Expectations: Senior citizens are a worried lot today in view of falling interest rates and rising inflation. Most of them survive on pension income as well as the returns generated from the saving and investment products like fixed deposits and post office schemes. However, the falling interest rates have pushed real returns into negative territory, making their survival difficult. Not only this, they have to spend more on healthcare costs which have risen drastically over recent years.
No wonder, they now need greater financial support and handholding than any other age group. Also, approach to taxation of senior citizens needs special consideration and focus on various aspects. Here is a look at what Finance Minister Nirmala Sitharaman can do for senior citizens in the Budget 2021.
Deduction for rental expenses incurred by senior citizens
With higher level of savings and pensions, many senior citizens are financially independent. However, they continue to rely on their children for moral and physical support. This means that many of them relocate their residences to stay within short distances of their children’s homes, and incur rental expenditure.
“Unlike the salaried employees who are eligible for exemptions relating to house rent expenses, there are no specific provisions for deduction of such expenses incurred by senior citizens. The exemption available u/s 80GG for those not receiving a House Rent Allowance is very restrictive, and limited to Rs 5000 per month. Hence, a specific deduction for house rent expenses incurred by senior citizens is the need of the hour,” says Saraswathi Kasturirangan, Partner, Deloitte India.
Section 80D provides for deduction of expenditure on health insurance premium for senior citizens up to Rs 50,000 per annum. If a senior citizen is not covered by health insurance, then medical expenses up to Rs 50,000 are available as deduction. However, these are mutually exclusive, and senior citizens end up incurring significant expenditure on medicines and out patient treatments, over and above the expenditure on medical insurance, and no deductions are available for such expenses. Considering the increasing medical cost, senior citizens should be allowed to claim both medical expenses as well as health insurance premium without the current restrictions, and the ceiling may be enhanced to Rs 100,000 p.a. to provide relief to those who incur significant medical expenses.
Enhancing the investment limit under Senior Citizen Savings Scheme
Senior citizens need to have a respectable level of assured returns on their investments to enable them to be financially independent during their ripe age. “The Senior Citizens Savings Scheme is an attractive scheme from this perspective. However, the investment limit under this scheme is Rs 15 lakh, which is too low and grossly inadequate to provide a reliable source of income to senior citizens. The limit under this scheme should be enhanced at least to Rs 50 lakh,” says Kasturirangan.
Increase of deduction limit in respect of interest income
A deduction of upto Rs 50,000 p.a. in respect of interest income from fixed deposits/savings bank/ post office account interest is available for senior citizens. Given the need for senior citizens to have higher disposable income in their hands for greater financial independence, this limit may be enhanced to Rs 100,000 p.a.
Overall, there are multiple approaches that the government needs to consider to soften the tax implications on senior citizens, and there is a high level of hope around these proposals.