Retirement Planning for Senior Citizens| RetyrSmart

News & Views

Budget 2018: Advantage RetyrSmarters!
SV Prasad, Chairman RetyrSmart Advisory

In the recent Union Budget presented on 1st February, 2018 the Government of India has announced a number of tax friendly measures for senior citizens.

This clearly acknowledges the growing absolute number of senior and retired persons (RetyrSmarters)in the country. Whilst as a percentage, younger people constitute a large majority of the Indian population, it is a fact that the number of RetrySmarters are growing year after year.

Rs.90,000 p.a. tax benefit

The aggregate tax deduction of upto Rs. 90,000 p.a. comprising Rs.40,000 by way of Standard Deduction from Pension Income and Rs.50,000 from interest income from Banks (both interest on savings bank accounts as well as fixed deposits) is a big plus. Hitherto, there was only a tax deduction of Rs.10,000 on savings bank interest for everyone. To further reduce the hardship of Senior Citizen RetyrSmarters, there would not be any tax deduction at source uptil Rs.50,000.

No tax uptil an income of nearly Rs.50,000 per month for Senior Citizen RetyrSmarters

Therefore, for RetyrSmarters who are 60 years and uptil 80 years, there is no tax uptil an income of Rs.3,90,000. This may be increased to Rs.5,40,000 by contributing Rs.1,50,000 to PPF and other eligible investments under Section 80C and to a further Rs. 5,90,000 by taking a Medical Insurance Policy to the extent of Rs.50,000. Therefore, income uptil nearly Rs.50,000 per month is without paying any tax.

No tax uptil a monthly income of Rs.65,000 plus for 80 years & above RetyrSmarters

For those who are 80 years or more, this would increase by a further Rs.2,00,000. This translates to Rs.5,90,000 including standard deduction and interest income and to Rs.7,90,000 including PPF contribution of Rs.1,50,000 and Medical Insurance Policy contribution of Rs. 50,000. This means a monthly income of Rs.65,800 is without paying any tax.

The detailed provisions are as follows:

• Standard Deduction (Sections 16 and 17[2] of the Income Tax Act) on Salary Income has been introduced upto Rs.40,000. It is to be noted that at the same time Transport Allowance of Rs. 19,200 p.a. and reimbursement of Medical Expenses upto Rs.15,000 per annum has been withdrawn. Therefore, for those RetyrSmarters who are working, there is an incremental benefit of Rs. 5,800 p.a. (Rs.40,000 less Rs.34,200).

• This Standard Deduction of upto Rs.40,000 would also be available for those not working and drawing a pension. and hence a major benefit.

• Deduction in respect of interest income (banks and post offices) of senior citizens (Section 80TTA) has been introduced upto an amount of Rs.50,000 p.a. This is a steep increase from the hitherto Rs.10,000 available on savings bank interest for everyone.

• Section 80 D is sought to be amended to increase the deduction available for payable of medical insurance policy for senior citizens from Rs.30,000 to Rs.50,000.

• The important inclusion in Section 80D is to also cover claiming of medical treatment incurred for those senior citizens who do not have a medical insurance policy. This is an important, friendly measure as many retired RetyrSmarters may not have a medical insurance policy. With costs of medical treatment steeply going up every day, this is a welcome provision as up to Rs.50,000 of such expenses per person would now be available for tax deduction.

• Therefore, in the case of husband and wife, both would now be entitled to claim actual medical expenses upto Rs.50,000 each, that is, in all totaling to Rs.1,00,000. This benefit is available provided both husband and wife are filing tax returns.

• Deduction under Section 80DDB for payment of treatment of specified diseases has been increased to Rs.1,00,000 for both senior citizens as well as very senior citizens.

SV Prasad