Budget 2023: Senior citizens want more medical insurance deductions, tax-free pension
Increased cost of healthcare for senior citizens, particularly post COVID-19, warrants a higher deduction limit for premiums as well as routine medical expenses, say financial planners. A higher deduction for interest earned on fixed deposits would also bode well for senior citizens, in Budget 2023.
As Union Budget 2023 is likely to be the last full-year Budget before the 2024 general elections in the country, individual tax-payers are hoping that Finance Minister Nirmala Sitharaman will announce a slew of tax benefits on February 1. For senior citizens (individuals over 60 years of age) raising the basic exemption threshold from Rs 3 lakh to Rs 5 lakh, at par with that of very senior citizens (those over the age of 80 years) is a key demand. This is the limit up to which income is not subject to tax. In addition, there are several other needs that financial planners feel the finance minister ought to address in this Budget
2/7
Allow tax deductions on medical expenses for all: Senior citizens who have purchased health insurance policies can claim tax deductions of up to Rs 50,000 under Section 80D on premiums paid. If their children pay premiums on their behalf, they can avail of this deduction. “In a country where medical expenses are not totally free even in government hospitals, ideally, the government should provide a 100 percent deduction against medical expenses without any limit,” says Pankaj Mathpal, Founder, Optima Money Managers. Regular health insurance policies do not cover outpatient department (OPD) expenses such as pharmacy bills, doctor consultation fees and diagnostic tests
3/7
Increase Sec 80D deduction limit on health insurance premium paid: This demand has gained traction particularly after COVID-19. Health insurance premiums have gone up post the pandemic outbreak and many have voluntarily enhanced their health cover. “If a senior citizen and spouse want to opt for an adequate, comprehensive cover, the premium amount could go well beyond Rs 50,000. The finance minister should look at raising Section 80D limit to Rs 1 lakh (under the old, with-exemptions tax regime),” says Preeti Zende, Founder, ApnaDhan Financial Services
4/7
Increase savings and FD interest deduction to Rs 1 lakh: Senior citizens are entitled to tax deduction of up to Rs 50,000 under Section 80TTB on interest earned on bank and Post Office savings fixed deposits (FDs). “In view of rising inflation that eats into their savings and limited sources of income, this limit should be raised to Rs 1 lakh,” says Kuldip Kumar, Partner, Vialto Partners
Make pension income tax-free This has been a long-standing demand, not only from senior citizens but also life insurance companies. Currently, annuity or pension income of retirees generated through their retirement corpus accumulated over the years is subject to tax. This is applicable to annuities purchased through the National Pension System (NPS) corpus as well as life insurers’ pension policies. The entire pension that retirees earn – principal as well as interest – is taxed. Senior citizens would hope their demand to exempt at least the principal component from tax is finally met during Budget 2023
6/7
New, dedicated fixed income instrument for senior citizens Home loan borrowers may be reeling under the burden of rising interest rates on the back of the Reserve Bank of India’s repo rates hikes, but depositors are a happy lot. Recently, the government raised interest rates on a host of small saving schemes and interest on senior citizens' saving scheme (SCSS) went up from 7.6 percent to 8 percent. “Fixed deposits, for instance, are giving good returns to senior citizens. However, interest rates are variable and cycle could turn. At present, senior citizens’ saving scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY) are the only two dedicated fixed income instruments available. They would ideally want another special product on similar lines that offers a minimum fixed rate of, say, 7.5 percent and maximum investment limit of more than Rs 15 lakh,” says Zende.
7/7
Ease tax return and refund process Tax experts feel the process of claiming tax refund for senior citizens who do not have a taxable income ought to be made simpler. This is feasible given the increased use of technology and data that the Income Tax Department has at its disposal. "Section 194P exempts senior citizens over the age of 75 years from filing income tax returns, provided the person only draws pension and interest income, and the interest income is earned from the same specified bank in which the pension is credited. The scope may be expanded and the benefit extended to individuals aged 60 years and above,” says Kumar.
Preeti Kulkarni is a financial journalist with over 13 years of experience. Based in Mumbai, she covers the personal finance beat for Moneycontrol. She focusses primarily on insurance, banking, taxation and financial planning
