NEW DELHI: With no significant gains for the salaried class and the higher income taxpayer reeling from the additional tax burden, the only section of the society that seems to be rejoicing is senior citizens. The Finance Minister has offered a bouquet of benefits for the retired people who constitute nearly 9 per cent of the total population. The tax benefits are two-pronged, impacting their tax savings and health protection.
In a welcome move, the tax exemption limit on interest income from bank savings deposits and post office schemes has been raised to Rs 50,000 from the existing Rs 10,000. It now also covers the interest income from fixed deposits and recurring deposits. This means that no tax will have to be deducted at source (TDS) on such income under Section 194A.

Given that post office schemes and fixed deposits comprise a big chunk of senior citizens' retiral corpus, this will result in a significant rise in their savings if their income falls in the taxable bracket. It also implies that senior citizens who do not have a taxable income will not have to furnish Form 15H if they do not want tax deducted at source.

Delhi-based chartered accountant H.C. Sogani, 66, who has a high amount in fixed deposits, is visibly excited. Among his Budget wishlist was a demand to raise the exemption limit on interest income and expand the scope to fixed deposits and recurring deposits. "My wish has been fulfilled by the Finance Minister, but I was hoping the basic exemption limit too would be raised to Rs 3.5 lakh," he says.

He is also happy about the increase in the investment limit of the Pradhan Mantri Vaya Vandana Yojana, which has been doubled to Rs 15 lakh from the existing limit of Rs 7.5 lakh. "I will now invest a minimum of Rs 10 lakh in the scheme," says Sogani.

The LIC scheme, for seniors above 60 years of age, was started in 2017 for one year, but has now been extended to March 2020. It offers an assured return of 8 per cent for 10 years and is an attractive option for senior citizens despite it being taxed at maturity. Given that the Senior Citizen's Savings Scheme is the only other plan that, at 8.3 per cent, offers a return of over 8 per cent, it a good option to invest in for the seniors who do not fall in the taxable bracket.

In another beneficial step, the government has raised the deduction limit on health insurance premium to Rs 50,000 from the existing Rs 30,000 for senior citizens under Section 80D. In addition, the deduction of medical expenditure for specific critical illness, from Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens, has been raised to Rs1 lakh for all senior citizens, under Section 80DDB.

"Medical inflation is at 13-15 per cent. The enhanced deduction of Rs 50,000 and additional critical illness exemption will incentivise senior citizens to get sufficient medical insurance coverage to tackle the growing medical expense burden," says Ashish Mehrotra, MD & CEO, Max Bupa Health Insurance.

This is one benefit that may also accrue to those below 60 years if they are paying the health insurance premium for their parents. Take Mumbai-based Purvesh Mehta, 38, who is paying a combined premium of Rs 50,000 for his parents and his own family. "It is a good initiative and will definitely help me with my tax savings," he says

It will also be an incentive for people like Mehta to buy bigger health plans for their parents since the extremely high premiums for senior citizens have been a deterrent till now. Adds Sanjeev Mantri, Executive Director, ICICI Lombard: "We expected a much higher increase of Rs 1 lakh for senior citizens and Rs 75,000 for those below 60 years. Given that the government has initiated the national health scheme for 10 crore families, it could have raised these limits too."