Amid the challenge to boost the economic growth along with providing relief to those hit by the pandemic, Finance Minister Nirmala Sitharaman is going to present her second full Union Budget on February 1, 2021.
As all individuals eagerly await the Budget announcement on income tax benefits under Section 80C and Section 80CCD, there are demands from the senior citizens as well.
A senior citizen is an individual resident between the age of 60 to 80 years. A super senior citizen is an individual resident who is above 80 years.
Both, government and the Reserve Bank of India (RBI) have been taking steps to keep the interest rate low to aid growth in the country. However, this is hurting the retired investors as falling interest rates in 2020 have hit them.
Most senior citizens rely on fixed-income investments to meet their day-to-day needs. Severely hit by the pandemic, this 2021's budget will be keenly observed by the senior citizens who are expecting a rise in the Income Tax (I-T) exemption limit and additional rebates.
Current Tax slab for senior citizen aged 60-80 years:
- Up to Rs 300,000 - Nil
- Rs 3,00,001 to 5,00,000 - 5 per cent
- Rs 5,00,001 to 10,00,000 - Rs 10,000 + 20 per cent of total income exceeding Rs 5,00,000
- Above Rs 10,00,000 - Rs 1,10,000 + 30 per cent of total income exceeding Rs 10,00,000
Most senior citizens preferred choice of investment bank fixed deposits (FDs) are offering a rate of interest of less than 6 per cent per annum across different tenure. This drop in interest rates has hit the income of most senior citizens.
The interest earned on saving deposits and FD with banks, post office or co-operative banks for up to Rs 50,000 by the senior citizen is eligible for deduction under Section 80TTB. There will be no deduction of tax at source up to Rs 50,000, which has to be computed for every bank individually.
Hence, the I-T exemption limit for senior citizens has been sought to be raised to Rs 1 lakh from the current Rs 50,000.
Senior citizens also expect the FM Sitharaman to announce a full tax rebate on senior citizen saving scheme. Some senior citizen investment options, which provide a regular income, are bank fixed deposits, Pradhan Mantri Vaya Vandana Yojana (PMVVY), Senior Citizen Saving Scheme (SCSS), Post Office Monthly Income Scheme (POMIS), Floating Rate Savings Bonds 2020 and Immediate Annuity plans of life insurance companies.