The recently concluded budget announcement has brought cheers to the senior citizens. The same day (i.e. February 1st) ‘The Economic Times’ published a lengthy article delineating the finer points which we felt shall be of great help to our readers as well. So, we are reproducing the same for your benefit.
“Budget 2021 proposes to exempt senior citizens who are 75 years or above and have only pension and interest income in a financial year, from filing income tax returns. As per the Budget 2021 proposals, they will not be required to file income tax returns (ITR) anymore. The bank paying income to them will deduct the necessary tax from their bank account.
As per the explanatory memorandum, such benefit will be available only if the following conditions are satisfied:
1) The senior citizen is resident in India and of the age of 75 or more during the previous year;
2) He has pension income and no other income. However, in addition to such pension income he may have also have interest income from the same bank in which he is receiving his pension income;
3) This bank is a specified bank. The Government will be notifying a few banks, which are banking company, to be the specified bank; and
4) He shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed.
Once the declaration is furnished, the specified bank would be required to compute the income of such senior citizen after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A of the Act, for the relevant assessment year and deduct income tax on the basis of rates in force. Once this is done, there will not be any requirement of furnishing return of income by such senior citizen for this assessment year. This amendment will take effect from 1st April, 2021.
This has come after Budget 2018 had announced several tax law changes to provide more tax benefits to senior citizens. These include tax benefits such as introduction of a new section 80TTB in the Income Tax Act, 1961, deduction for medical expenditure in case of no health insurance coverage etc.
Shalini Jain, Tax Partner – People Advisory Services, EY India says, "In view to ease the compliance burden for our elderly, the government has done away with the requirement of filing tax returns for senior citizens of age 75 years or above subject to satisfaction of conditions." Under section 80TTB, seniors can claim up to Rs 50,000 interest income received from banks and post offices as a deduction from their income thereby making this type of interest income for senior citizens effectively tax exempt up to Rs 50,000.
Earlier, senior citizens were entitled to similar tax-exemption for interest income from bank and post office savings accounts but only up to Rs 10,000 under section 80TTA. The Rs 50,000 deduction was the biggest tax relief announced in Budget 2018 for most senior citizens as they earn most of their income through interest from bank FDs and post office schemes. TDS limit for bank fixed deposit interest was also hiked simultaneously for senior citizens. Along with that, Budget 2018 increased the limit on health insurance premiums paid that can be claimed as a deduction from income from Rs 30,000 to Rs 50,000 for senior citizens. Additionally, if a senior citizen does not have a medical insurance policy and has incurred medical expenditure during the financial year, then also he/she can claim deduction of up to Rs 50,000 for such expenses under section 80D of the Income Tax Act.
Earlier, a deduction for medical expenditure up to Rs 30,000 was allowed for super senior citizens aged 80 years and above if they were not covered by any medical insurance policy. For senior citizens suffering from certain critical illnesses, as specified in Rule 11DD of the income tax rules, that are covered under section 80DDB of the Act, deduction limit was raised to Rs 1 lakh for all senior citizens, from the earlier Rs 60,000 (in case of senior citizens) and Rs 80,000 (in case of very senior citizens).
The government has also extended the deadline by which seniors can invest in Pradhan Mantri Vaya Vandana Yojana (PMVVY) to March 31, 2023. The maximum amount The maximum amount that can now be invested in the scheme is Rs 15 lakh from the previous limit of Rs 7.5 lakh as announced in Budget 2018.”