Union Budget 2018 Brings Cheer Among Senior Citizens of India!

Economy 2018512 views

Highlights

  • Standard Deduction of ₹40,000 Proposed
  • Tax Exemption Limit on Mediclaim Hiked to ₹50,000 from ₹30,000
  • Tax Exemption Limit on Medical Expenditure Increased to ₹1,00,000 from ₹60,000

The Union Budget 2018 may not have met the expectations that many pinned on, but has given senior citizens many reasons to cheer. First of the many mood lifters was a standard deduction of ₹40,000 proposed by the Finance Minister Arun Jaitley for FY 2018-19. The standard deduction has made a comeback after it was removed in 2005-06. The second announcement of increasing the tax exemption limit on mediclaim from ₹30,000 to ₹50,000 under Section 80D of the Income Tax Act must have also delighted the senior citizens. Even the tax exemption on medical expenditure, which is provided under Section 80DDB, is raised to ₹1,00,000 from the existing limit of ₹60,000. And last but by no mean the least, the government has proposed to hike the interest income on bank/postal deposits to ₹50,000 from the existing cap of ₹10,000. The benefit is provided under Section 80TTB.

However, the government maintained a status quo on the deduction limit of ₹1.5 lakh given for investments in Public Provident Fund (PPF), Equity-linked Saving Scheme (ELSS), tax-saving Fixed Deposits, under section 80C of the IT Act. Besides, there’s no change in the income tax rates. You would, however, be more interested in knowing your tax liability post the announcements, won’t you? So, this article is all set to help you know that.

How Much of a Tax Saving Would be for Senior Citizens Post Budget Announcements?

Senior citizens can either be a pensioner or a salaried. While the state-owned companies don’t normally keep people above 60 years, the private counterparts can have those set of people.

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To know the savings you as a senior citizen can make with the latest budget announcements, you need to take the help of an example shown below.

Example – Rakesh Panwar is a 62-year old marketing head in a reputed firm. He earns an annual salary of ₹20 lakh. Let’s take a look at the table below to know the savings he can make as per the latest announcements.

ParticularsTax Treatment in Ongoing FY 2017-18 (In ₹)Tax Treatment in Upcoming FY 2018-19 (In ₹)
Annual Income20,00,00020,00,000
(B) Standard Deduction-40000
(C) Gross Income20,00,00019,60,000
(D) Deduction onMediclaim 3000050000
(E) = (C-D)19,70,00019,10,000
(F) Deduction on Medical Expenditure60000 1,00,000
(G) = (E-F)19,10,00018,10,000
(H) Deduction on Interest Earned from Bank/Postal Deposits1000050000
(I) = (G-H)19,00,00017,60,000
(J) Deduction on PPF/ELSS/Bank FD 1,50,000 1,50,000
(K) Total Taxable Income = (I-J)17,50,00016,10,000
(L) Income Tax LiabilityUp to 3,00,000 - NIL

From 3,00,000-5,00,000 - 5% of 2,00,000 = 10,000

From 5,00,000-10,00,000 - 20% of 5,00,000 = 1,00,000

From 10,00,000 – 17,50,000 -30% of 7,50,000 = 2,25,000

Total Income Tax Liability = 3,35,000
Up to 3,00,000 - NIL

From 3,00,000-5,00,000 - 5% of 2,00,000 = 10,000

From 5,00,000-10,00,000 - 20% of 5,00,000 = 1,00,000

From 10,00,000-16,10,000 -
30% of 6,10,000 = 1,83,000

Total Income Tax Liability = 2,93,000
(M) Education Cess3% of 3,35,000 = 10,0504% of 2,93,000 = 11,720
(N) Income Tax + Education Cess3,45,0503,04,720

So, Rakesh is poised to save a tax of ₹40,330 (3,45,050-3,04,720), which is around 11.67% (approx.) lower than what would be the case in FY 2017-18. Based on the income level, the tax liability can differ among the senior citizens.

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Personal Loan Interest Rates July 2018
Bajaj Finserv10.99% - 16.00%
Fullerton India14.00% - 33.00%
HDFC Bank11.25% - 21.25%
ICICI Bank10.99% - 18.40%
IndusInd Bank10.99% - 16.00%
Kotak Bank10.99% - 20.99%
RBL13.00% - 18.00%
Standard Chartered Bank10.99% - 14.49%
Tata Capital10.99% - 18.00%
Home Loan Interest Rates July 2018
State Bank of India/SBI8.45% - 9.00%
HDFC8.50% - 9.15%
Bank of Baroda8.50% - 9.50%
LIC Housing8.45% - 8.90%
PNB Housing Finance8.99% - 10.75%
ICICI Bank8.55% - 8.80%
Axis Bank8.50% - 8.85%
Citibank8.40% - 9.20%
Indiabulls Housing Finance Limited8.50% - 10.80%
Kotak Bank8.60% - 8.70%
DHFL9.05% - 9.95%
Reliance Home Finance8.75% - 10.00%
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