5 Common Expectations of Senior Citizens from the Union Budget 2023-24

As we have officially entered the new year 2023, all eyes with high hopes are on the approaching Union Budget for FY 2023-24. While a budget aims to look at the country's overall growth, many features directly impact an individual's finances as well.

The Union Budget for FY 2023-24 will be the last full-year budget from the Modi government ahead of the Lok Sabha elections. The budget is being presented at a crucial juncture of geo-political uncertainties, high inflation, and slowing world economic growth. One can only hope that, while the emphasis will be on maintaining a consistent economic growth and development trajectory, the upcoming budget will provide significant relief from growing inflation.

Finance Minister Nirmala Sitharaman will present Union Budget for the assessment year on February 1, 2023. Amid rising inflation and high-interest rates, it is usual for individual's have certain expectations from the budget this time. A hike in the basic income tax exemption limit, a higher deduction limit in section 80C, sops for the housing sector, a separate deduction section for life insurance, etc., are some of the key expectations of the taxpayers from the upcoming budget. However, experts do not expect big changes in the income tax regime or structure this year.

Having said that, senior citizens make up a sizeable portion of the tax-paying population in India as they generate income which is mostly passive in nature. Given the rising cost of living and healthcare, senior citizens believe that the current income tax incentives are insufficient and are expecting a slew of measures from this budget that offer tax benefits.

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Here are some of the common expectations of senior citizens from the upcoming Union Budget for FY 2023-24:

1. Raise the basic income tax exemption threshold for senior citizens

Many senior citizens do not have a regular source of income, and they often rely on their savings and interest or returns earned on their investments. With low-interest rates on traditional instruments, this segment of senior citizens has been hit hard. Thus, a hike in the basic income tax exemption limit for senior citizens is one of the key expectations of the 2023 budget.

Currently, the basic tax exemption limit is Rs 3 lacs for senior citizens (above 60 years of age) and Rs 5 lacs for very senior citizens (above 80 years of age). This is the limit up to which senior citizen's income is not subject to tax. Now, the demand is that the budget should revise the basic tax exemption threshold for senior citizens (over 60 years of age) from Rs 3 lakh to Rs 5 lakh, at par with that of very senior citizens (over 80 years of age).

2. A higher tax deduction limit under Sections 80C and 80TTB

• Section 80C:

  The section 80C of the Income Tax Act, 1961 encompasses the majority of savings/investment-based deductions of up to Rs 1.5 lacs for every financial year for investments in various instruments like ELSS in mutual funds, Public Provident Fund (PPF), National Savings Certificate, Senior Citizen Savings Scheme, 5-year term deposit, etc. This maximum decudtion limit of Rs 1.5 lacs has not been revised in the last 8 years. Thus, senior citizens are now expecting an increase on this limit from the upcoming budget of 2023.

  According to experts, the aforementioned limits, which were last revised in the 2014 Budget, are expected to be revised upwards. There may be an additional relief of Rs 50,000 in addition to the existing limit of Rs 1.5 lacs for senior citizens aged 60 and above.

• The holding period for specific investments under Section 80C should be reduced for senior citizens:

  The traditional investment instruments eligible for deduction under Section 80C are subject to specified lock-in periods, for instance, ranging from 3 to 5 years (for ELSS) (for NSC and fixed deposits). However, senior citizens may require liquid cash for their physical well-being, medical care, or other emergencies. As a result, it is expected from this budget that the aforementioned lock-in timelines will be revised and rationalised for senior citizens.

• Section 80TTB:

  Section 80TTB allows senior citizens to claim a tax deduction of up to Rs 50,000 on the interest income from bank fixed deposits and post office savings accounts. However, this threshold has not been revised in the last 5 years and requires adjustment based on the current rate of inflation. Hence, in the Union Budget 2023, senior citizens are expecting the government to increase the existing tax deduction limit under section 80TTB of Rs 50,000 to be raised to Rs 75,000.

  Furthermore, because interest income on NSC is one of the primary sources of income for many senior citizens, it should be included in the scope of 80TTB. This would also provide much-needed relief to senior citizens with limited sources of income amid rising inflation.

3. A slew of relief measures for healthcare for senior citizens

The skyrocketing rise in healthcare costs amidst the spiralling inflation warrants a higher deduction limit for premiums as well as routine medical expenses.

• Higher tax deduction under section 80D on health insurance premiums for senior citizens

  The demand for health insurance premiums has gained traction post the COVID-19 pandemic outbreak, and many individuals are voluntarily opting for health insurance.

  Currently, under section 80D, senior citizens are provided with a deduction of Rs 50,000 for any health insurance premiums, which seems to be inadequate at present. Given the uncertainties and high healthcare expenditure, senior citizens are expecting an increase in the threshold on tax deductions provided for health insurance premiums.

• Increase in tax deduction threshold for senior citizens under section 80DDB:

  Section 80DDB provides for a deduction to individual taxpayers and HUFs for medical expenses incurred for the treatment of specified diseases. Senior citizens could claim up to Rs 1 lac under section 80DDB under specified conditions for themselves or dependants, including spouses, children, parents, brothers, and sisters. However, considering the fact that medical costs have spiralled over the years, senior citizens are expecting this limit to be increased further.

4. Allow tax-free pensions for senior citizens

At the moment, any annuities purchased through the National Pension System (NPS) corpus or pension income of retirees generated through their retirement corpus accumulated over the years is subject to tax. The entire principal and the interest incurred are taxed as per the individual's income tax slabs.

Senior citizens are expecting their demand to exempt at least the principal component from tax to be finally met during budget 2023. This has been a long-standing demand, not only from senior citizens and life insurance companies but also from the Pension Funds Regulatory and Development Authority (PFRDA).

5. Reduction in age limit for senior citizens to be exempt from filing ITR

Under Section 194P of the Income Tax Act, senior citizens aged 75 years and above are exempted from filing income tax returns subject to certain specified conditions:

• The senior citizen should be of age 75 years or above

• The senior citizen should be a 'Resident' in the previous year

• The senior citizen only has pension income and interest income

• The interest income is accrued/earned from the same specified bank in which he/she is receiving the pension

Many senior citizens struggle while filing the ITR due to the complicated process, hassle of documentation and being technology-averse. It is expected that the Union Budget 2023 lowers the minimum age limit for senior citizens to 65 years from the current limit and relieve them of the burden of filing their returns.

Additionally, the process of claiming tax refund for senior citizens who do not have a taxable income should be simplified. Given the increased use of technology and data at the Income Tax Department's disposal, this is feasible.

Thus, these are the few common expectations of senior citizens towards the upcoming Union Budget for FY 2023-24. However, which of these expectations will be revered remains to be seen on February 1, 2023.

Therefore, since the Union Budget has a significant amount of impact on the financial future of every individual, apart from the aforesaid, there are various other expectations of the common man from the upcoming budget. You may read 8 Expectations of the Common Man from the Union Budget 2023-24. Furthermore, in the interest of all investors, the Indian mutual fund sector has presented its proposals for the Union Budget 2023-24. Click here to read 7 Key Expectations of Mutual Funds from the Union Budget 2023-24.