Benefits limited to Rs 14,337 for those in the 20% bracket.
A combination of additional tax savings from investment in pension schemes, medical insurance premiums and additional exemption on transport allowances will accumulate into savings of up to Rs 21,506 annually for individuals falling in the highest marginal rate tax category.
The annual benefits, however, will be limited to Rs 14,337 for those falling in the 20 per cent tax bracket and will amount to Rs 7,168 for those falling in the lowest tax bracket.
In his budget speech, the finance minister, Arun Jaitley announced additional benefit for individuals on investment in National Pension Scheme (NPS) and also raised the deduction available on health insurance premium from Rs 15,000 to Rs 25,000 in a year along with raising the deduction limit for treatment of severe disabilities.
The NPS received the biggest boost as the government announced to provide additional tax deduction on investment of Rs 50,000 per annum in the scheme under section 80CCD that is over and above the deduction already available on Rs 1.5 lakh under section 80C. As a result, an individual can claim total tax benefit of Rs 2 lakh under the two sections.
The government has, however, not made investments in NPS tax free at the time of withdrawal. The accumulated corpus at the time of withdrawal will continue to be taxable.
The government also increased the deduction limit on health insurance premium under section 80D from Rs 15,000 to Rs 25,000. This limit, in case of senior citizens, has been raised by Rs 10,000 from Rs 20,000 to Rs 30,000.
In a significant move, Jaitley has allowed deduction of expenditure of similar amount in case of very senior citizens who are not eligible to take health insurance. He also proposed to increase the limit of deduction in case of very senior citizens under section 80DDB on medical expenditure of specified diseases from Rs 60,000 to Rs 80,000. The government has also doubled the exemption limit on transport allowance from Rs 800 per month to Rs 1,600 per month.