Senior citizens have a lot of hope from the budget announcements each year. This time in Budget 2022 they will look forward to Union Finance Minister Nirmala Sitharaman proposing measures that can impact their financial life positively. Noticeably, the interest rate on bank fixed deposits have been around 6.5 per cent for the senior citizens thus impacting the return on their retirement portfolio.
Currently, interest income earned on deposits by senior citizens is deductible from total income thus helping them reduce their tax liability. Will they get an enhancement in the limit in Budget 2022 remains to be seen. “Enhancement of deduction provided with respect to interest on deposits received by senior citizens from Rs 50,000 to Rs 1,00,000 under Section 80TTB is expected,” says Raghunathan Parthasarathy,Associate Partner – Tax & Regulatory Services, BDO India
Under Section 80TTB of the income tax act, interest income earned from deposits qualifies for a deduction from one’s gross total income. The maximum limit under section 80TTB is Rs 50,000 in a year. This section is already available to senior citizens from April 1, 2018. Importantly, the benefit of section 80TTA, which allows deduction of the interest income (up to Rs 10,000) from the savings account, is not available to the senior citizens.
Tax benefit on health insurance premium for senior citizens health covers is another area that requires attention by the FM. Currently, for those who are below age 60, the tax benefit on the premium paid is up to Rs 25,000. This includes self, spouse and children and the health cover could be a Mediclaim, Family Floater, Critical Illness etc. the premium paid towards any of these schemes gets deducted from the gross income under section 80D. For those who are above age 60, the limit is Rs 50,000. “Enhancement of deduction provided with respect to payment of medical insurance premium by senior citizens from Rs 50,000 to Rs 1,00,000 under Section 80D is expected in Budget 2022,” says Parthasarathy.