With the Union Budget 2025 set to be presented by Finance Minister Nirmala Sitharaman on February 1, expectations are high among senior citizens regarding potential tax exemptions and interest rates on savings schemes.
“Finance Ministers over the years have been keeping in mind that for senior citizens, there should be a savings instrument that will give a return which is above the market-determined rate, long term duration and risk-free,” an industry expert said.
Anticipated tax exemptions
Tax filing
Senior citizens aged 75 years or older are exempt from filing income tax returns if their income is limited to pension and interest earned from the same specified bank where their pension is credited.
In such cases, the specified bank handles tax deduction at source, removing the requirement to file returns. Lowering the age threshold for this provision to 70 years could extend this benefit to a larger segment of senior citizens.
Basic exemption limit increase
“Key expectations include raising the basic exemption limit under the new tax regime from Rs 3 lakhs to Rs 5 lakhs, revising deductions and exemptions, and increase in the benefits under house rent allowance (HRA) for the metro cities,” another industry expert said.
Currently, the basic exemption limit for senior citizens stands at Rs 3 lakh under both the old and new tax regimes, with super senior citizens (aged 80 and above) benefiting from a Rs 5 lakh exemption only under the old regime. There is growing speculation that the government may raise this limit significantly, with some experts suggesting a new threshold of Rs 10 lakh to alleviate the tax burden on seniors who often have limited income streams due to retirement.
Tax exemption on senior citizen savings scheme
To reduce the financial burden on senior citizens, provisions could be introduced to offer tax exemptions or deductions on the interest earned under the Senior Citizens Savings Scheme (SCSS), 2024.
“Higher interest rates on senior savings schemes like the Senior Citizens’ Savings Scheme could make them more appealing investment options,” an tax expert said.
As the Union Budget 2025 approaches, senior citizens are hopeful for significant reforms that address their unique financial challenges. The combination of increased tax exemptions and enhanced interest rates on savings schemes could offer substantial relief amidst rising living costs.
