Budget 2023: SBI report suggests enhancing tax relief on interest income for senior citizens

Relief to senior citizens can be given by increasing exemption threshold on interest from savings, FDs and RDs.

Senior citizens have pinned their hopes on finance minister Nirmala Sitharaman to provide relief to the segment in the Union Budget for 2023-24 as they grapple with squeezing disposable income on account of rising cost of day-to-day items and healthcare.

One of the recommendations for the finance minister is to increase the threshold for interest exemption from the current Rs 50,000 to Rs 75,000-Rs 1 lakh.

“Under 80TTB interest income from deposits by senior citizen (Savings bank accounts, fixed deposits, recurring deposit accounts) up to Rs 50,000 is exempted from income tax. This threshold may be increased to Rs 75,000 / Rs 1 lakh which still will have much lower fiscal cost,” the latest ecowrap report from SBI Research said.

The report expects the fiscal deficit for FY24 at 6 per cent of the GDP. This will result in a consolidation of 40 basis points from the current fiscal, the report said.

The tapering of deficit is likely on account of a lower subsidy bill of around Rs 3.8-4 lakh crore. The capital expenditure is also expected to go up by around 12% in the Union Budget for 2023-24, according to the report.

It estimates net market borrowings for FY24 to be around Rs 11.7 lakh crore.

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“As far as borrowing is concerned, we believe net market borrowing of the Centre in FY24 will be around Rs 11.7 lakh crore and with repayments of Rs 4.4 lakh crore, gross borrowing are expected at Rs 16.1 lakh crore. We believe switch of ~Rs 50,000 crore is also likely to be announced.”

The report expects that the government will continue to rely on small savings scheme to finance the fiscal deficit.

“…the Government will continue to rely on small saving schemes (Rs 5 lakh crore likely in FY24). It can give a hard push to SSY (Sukanya Samriddhi Yojana), through encouraging fresh registrations in a mission drive mode, allowing one time registrations for all leftover cases up to 12 years.”