Budget 2022: Four key income tax expectations for senior citizens

In India, there are nearly 138 million senior citizens in 2021, including 67 million men and 71 million women. Out of this, a significant class of senior citizens are taxpayers and have many expectations from Budget 2022 particularly as Covid-19 has impacted this segment the most. Some of the expectations of senior citizens from the budget are as under:

1. Increase in the threshold limit for S. 80TTB and applicability of the same to be extended to NSC interest Section 80TTB of the IT Act provides for a deduction of up to ₹50,000 for any income received by a senior citizen by way of interest on deposits with a specified banking company or a co-operative society engaged in the business of banking or a Post Office, a deduction of an amount up to ₹50,000 shall be allowed. There is a need to specifically extent the benefit to interest income on National Savings Certificate as it is one of the main sources of income for many senior citizens. Further, the threshold limit for such deduction may be extended to ₹75,000 in the wake of rising inflation index.

2. Increase in threshold for mediclaim premium for senior citizens. Considering the pandemic situation of the country in the last few years and the rising inflation, there has been a spike in the medical expenditure as well as health insurance or mediclaim premiums. At present, Section 80D provides for a restriction of ₹50,000 with respect to any mediclaim premium/expenditure incurred by a senior citizen. Considering the existing situation, there is a need to increase such threshold to ₹75,000. Also, senior citizens, being more prone to the illness, may be provided a deduction for medical expenditure incurred with respect to Covid-19.

3. Lock-in Period of holding for specified investments under 80C be rationalised for senior citizens. Currently, certain investments under section 80C are eligible for deduction subject to the specified lock in periods. For instance, in case of fixed deposits with banks or post offices, the lock in period is five years, NSC for five years and in case of ELSS it is 3 years. In case of senior citizens, it would be prudent to review the lock-in timelines to 3 years considering their need for liquidity and also the age factor.

4. Increasing the threshold limit for investment linked deductions under section 80C. One of the very popular deductions which many taxpayers avail is u/s 80C of the IT Act which provides for investment linked deductions such as Provident fund, ELSS, life insurance premium, housing loan repayment, five years bank deposits, etc. The existing threshold limit of ₹150,000 under this section was last revised in the Budget 2014. Thus, considering the inflation over the years and the greater need for financial security due to economic uncertainty for senior citizens, the threshold limit should be enhanced to ₹200,000.

Suresh Surana is the founder of RSM India