Budget to meet your tax saving goals
As any financial year begins, we come across a lot of speculations around the budget presented for that year. There are reforms across sectors that prove beneficial for the public and certainly help them in a big way by saving tax. The budget of FY 2018-2019 too incorporated new areas that help you save tax, especially if you are a Senior Citizen. Since we are nearing the time which requires our intervention on saving tax, it is apt for you to know about the newly introduced sections where you can save tax.
Tax-exempted medical premium increased from INR 30,000 to INR 50,000 u/s 80 D, Income Tax Act, 1961
This is applicable for senior citizens of 60 years of age. Till last financial year, the premium paid up to INR 30,000 towards health insurance for a senior citizen was exempted from tax. However, for the current financial year the limit has been raised to INR 50,000. So now anyone paying the medical premium up to INR 50,000 for a senior citizen will be saving tax up to INR 15,600. Tax benefit is calculated for the highest tax slab of 30% and includes 4% health and education cess.
NPS withdrawal made 100% tax-free
The Union Cabinet has offered complete tax exemption on 60% of the NPS corpus withdrawn on maturity making NPS even more tax friendly. National Pension System is an initiative by Govt. of India which is a tax-saving investment tool that fosters retirement planning. NPS investors can invest up to INR 1.5 lakh under Sec 80 C and additional INR 50,000 under Sec 80 CCD (1B) of Income Tax Act, 1961.
NPS is a tax-efficient tool even during the Redemption Phase. At maturity, it is mandated to utilize the 40% of the corpus to buy an annuity that continues to give a regular income/ pension to the investors, while the remaining 60% of the corpus can be withdrawn by the investor as a lump-sum amount. Earlier only 40% of this withdrawal amount was tax-free while the remaining 20% was taxed. But now there will be a complete tax exemption on this 60% of the withdrawn corpus amount.
Sr. Citizens can claim a tax deduction of up to INR 50,000 u/s 80TTB
A new section was introduced in the Budget 2018 that benefitted the Sr. citizens - 80TTB under the Income Tax Act 1961. They can now claim a tax deduction of up to INR 50,000 on interest earned from deposits held with a bank, a banking co-operative society or with a post office. With this benefit, INR 50,000 will get deducted from the gross annual total income before the tax is levied on it. However, not all interest income can be claimed as a deduction u/s 80TTB. Following is the list of inclusions under the 80TTB of Income Tax Act:
- Fixed deposits, recurring deposits or savings accounts withheld with a bank, a banking co-operative society or with a post office.
- Senior Citizen Savings Scheme accounts
- Post office time deposits
- 5-year recurring deposits
- Post Office Monthly Income Schemes
Senior citizens need not to pay TDS on interest income up to INR 50,000
As per the clarification issued by The Central Board of Direct Taxes (CBDT) it has been stated that banks cannot deduct any TDS from a senior citizen’s interest income in a single financial year up to INR 50,000. Previously the limit of TDS deduction was INR 10,000 per financial year irrespective of the age of the individual taxpayer.