New Delhi: Union Finance Minister Nirmala Sitharaman presented the pre-budget on Sunday. This is the first time in the history of independent India that a Finance Minister has presented the financial budget on a Sunday, a weekly holiday. This year’s budget has brought good news for senior citizens and pensioners, with a major announcement made for them.
The central government has doubled the TDS (Tax Deducted at Source) limit on interest earned on fixed deposits (FDs) by senior citizens in banks and post offices, increasing it from Rs. 50,000 to Rs. 1 lakh.
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This government decision will prove to be a boon for senior citizens who keep their earnings safe in fixed deposits, Senior Citizen Savings Schemes, and savings accounts.
How much money will they receive?
This government decision will benefit senior citizens. The biggest and most immediate benefit of this change will be improved liquidity or cash flow. Most senior citizens depend on interest income for their monthly medicines, household expenses, and healthcare.
Now, with the increase in the TDS deduction limit, they will receive a larger amount of money. Previously, if a senior citizen received Rs. 90,000 in annual interest, the bank would deduct tax on the remaining Rs. 40,000 after the Rs. 50,000 exemption limit. This reduced the monthly amount they received.
This means that if your income is up to Rs. 1 lakh, there will be no deductions at the bank level. Now, Rs. 90,000 will be received without any deductions. This is considered a major step by the government.
Relief from documentation requirements
For senior citizens, filing income tax returns and waiting for refunds is a mental and physical burden. Many senior citizens have a total income that does not fall under the tax bracket. Yet, due to TDS deductions by banks, they have to file ITRs to get their money back.
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Increasing the TDS limit will relieve senior citizens from the repeated need to submit Form 15H. It is important to clarify here that this rule is related to TDS (Tax Deducted at Source) deduction, and not to complete tax exemption. Furthermore, Section 80TTB also provides senior citizens with a deduction of up to ₹50,000 on interest income.
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