Union Budget 2024: Raise senior citizens' basic exemption limit to Rs 10 lakh, hike health premium deduction

July 11,2024

Now that the date of the full-year Union Budget for 2024-25 – July 23 – has been announced, all eyes will be on the likely contents of Finance Minister Nirmala Sitharaman’s bahikhata over the next two weeks.

This time round, senior citizens in particular are expecting tax concessions to be announced during the Budget, ahead of state assembly elections in November.

For one, the ruling party had, in its manifesto, promised to extend the Ayushman Bharat scheme, which offers health coverage of up to Rs 5 lakh to economically weaker sections, to individuals over the age of 70 years. It remains to be seen whether this translates into reality in the Budget announcements.

This apart, chartered accountants and financial experts feel that the government can do more to alleviate financial concerns of senior citizens.

Raise the basic exemption limit to Rs 10 lakh

At present, the basic exemption limit – below which individuals do not have to pay any income tax – for senior citizens is Rs 3 lakh under the old as well as new tax regimes. In case of the latter, it is Rs 3 lakh for all tax-payers.

This should be raised to Rs 10 lakh under the new, minimal exemptions regime, feel tax experts. “There are many senior citizens who earn interest income of Rs 5-6 lakh from their bank or post office deposits. They have to go through the hassle of filing their returns, and managing the paperwork is a tough task for them. By increasing the basic exemption limit to Rs 10 lakh, the government will boost the ease of living for this section of the population,” says Mumbai-based chartered accountant Chirag Chauhan, Founder, CA Chauhan & Co.

This will ensure that they do not need to maintain records for the purpose of filing returns. “The government may take a tax revenue hit of Rs 500-1,000 crore, but it will be a big relief for millions of senior citizens who will then be out of tax bracket,” he adds.

Nitesh Buddhadev, Founder, Nimit Consultancy, is also of the opinion that senior citizens should be eligible for a higher basic exemption limit. “The new regime does offer tax rebate for incomes up to Rs 7 lakh. However, the moment income crosses this threshold, the tax bracket starts at Rs 3 lakh (basic exemption limit for all under the new regime). This is too little for senior citizens who have to take care of spiraling medical expenses. So, the basic exemption limit should be raised to at least Rs 5 lakh for this segment,” he says.

Hike the tax break on bank deposit interest

Again, in line with rising inflation, the Rs 50,000 deduction limit under section 80TTB on savings and fixed deposits needs to go up. “It should be hiked to Rs 1 lakh to provide relief to senior citizens,” says Chauhan.

Offer relief on health insurance premium

After COVID-19 wreaked havoc on India’s healthcare ecosystem as well as families’ finances, many have had to deal with steep increase – up to 80 percent in some cases -- in health insurance premiums. The maximum brunt has been borne by senior citizens due to their advanced age and health status.

To ease the burden on their budgets, the central government should consider increasing section 80D deduction on health insurance premiums from Rs 50,000 to Rs 1 lakh, say chartered accountants.

“The deduction limit for senior citizens needs to be doubled to Rs 1 lakh as Rs 50,000 is not sufficient anymore. Also, given how indispensable medical expenses are, this deduction ought to be introduced in the new regime too,” says Buddhadev.

Allow deductions on both medical expenses and health premiums

Under the old tax regime, senior citizens who do not have health insurance covers are entitled to a deduction of up to Rs 50,000 under section 80D on medical expenses incurred. Besides raising the deduction limit, the financial minister should permit them to claim deductions for both – health premiums as well as medical expenses incurred.

This will provide the much-needed financial cushion for senior citizens as health insurance policies do not cover routine medical expenses such as doctors’ consultation fees and investigations, which are a drain on their financial resources.