NEW DELHI: Senior citizens have turned out to be the single largest beneficiaries of the tax incentives announced by Finance Minister Arun Jaitley on Thursday. The middle class and other segments saw meagre gains.
The concessions proposed for the elderly in the Union Budget will result in a total tax benefit of Rs 4,000 crore for the segment.
Jaitley ruled out changes in income tax slabs and reintroduced a 10 per cent long-term capital gains tax on equities in the wake of surging stock markets. However, he enabled senior citizens to claim Rs 50,000 in exemptions on interest income per year. Moreover, tax deducted at source (TDS) will not be required for such income.
Earlier, the exemption — applicable on income from deposits with banks and post offices, including fixed and recurring deposits — was capped at Rs 10,000.
Senior citizens have also been given increased deduction benefits for health insurance premiums and/or medical expenditure. Deduction has gone up to Rs 50,000 from Rs 30,000 for all senior citizens.
Medical expenditure for certain critical illnesses will be deductible up to Rs 1 lakh per annum. Earlier, the deduction limit was Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens.
The Pradhan Mantri Vaya Vandana Yojana — a pension scheme that assures an 8 per cent return — is being extended till March 2020, with the existing limit on investment enhanced to Rs 15 lakh from Rs 7.5 lakh.
Experts say the concessions will make life easier for the elderly.
“(They) will face a much lower burden of taxes, this is especially crucial when interest rates from banks and deposits are falling,” Archit Gupta, founder & CEO, ClearTax noted.
The middle class, however, had little to cheer. While a standard deduction of Rs 40,000 for transport and miscellaneous medical expenses has been introduced, this will be in lieu of existing deductions on allowances.
Experts say this will reduce the amount taxable under salary by Rs 5,800.
“The salaried segment did not receive any added benefits other than a higher standard deduction,” Shanti Ekambaram, President – Consumer Banking, Kotak Mahindra Bank, said.
Edu, health care cess to impact income tax
Taxpayers will also have to contend with a higher cess on income tax, with a proposal to merge the existing three per cent education cess with a healthcare cess to fund outlays in these sectors. The proposed cess on income tax will stand at four per cent