Union Budget 2022 for Senior Citizens

Being a senior citizen in India means that you are a citizen of India and have attained the age of 60 years or more. If you have attained the age of 80 years or more, you will be a super senior citizen of India. People in this age group face several challenges due to multiple factors, such as increased healthcare expenses and lack of financial security. In addition, the post-pandemic situation has introduced new challenges for the elderly.

People had expectations from the Union Budget 2022. In this article, you will learn how much of those have turned into reality, with a focus on its outcome for senior citizens.

Key Announcements in the Union Budget for Senior Citizens 

In this section, you will read about the announcements made by our Finance Minister that could affect senior citizens. 

  • No Change in Income Tax Slab 

Let’s start with the one announcement which had nothing new to offer – the income tax slab. There has been no change in the income tax slab for senior citizens and super senior citizens.

Before you look at the income tax slab, you should know that from the financial year 2020-21, every individual can opt either to continue with the existing income tax rates (“Old Tax Regime”) by availing tax deductions or opt for the newly introduced reduced income tax rates (“New Tax Regime”) without availing any tax deductions. 

Hence, here is what the income tax slab will look like for senior and super-senior citizens: 

Income Tax Slab as per the Old Tax Regime (in ₹): 

Income Tax Slab        Income Tax Rate Health & Education Cess 
Senior Citizen (60+) Super Senior Citizen (80+)Senior Citizen (60+)Super Senior Citizen (80+)
Up to 3 lakhNIL NIL NIL NIL 
3 lakh to 5 lakh 5% NIL 4% NIL 
5 lakh to 10 lakh10,000 + 20% above 5 lakh20% 4% 4% 
More than 10 lakh 1,10,000 + 30% above 10 lakh1 lakh + 30% above  10 lakh4%4% 

Income Tax Slab as per the New Tax Regime (in ₹): 

Income Tax Slab          Income Tax Rate  Health & Education Cess
Senior Citizen (60+) Super Senior Citizen (80+)Senior Citizen (60+)Super Senior Citizen (80+)
Up to 2.5 lakh NIL NIL NIL NIL 
2.5 lakh to  5 lakh 5% 5% 4%4%
5 lakh to 7.5 lakh 12,500 + 10% above 5 lakh12,500 + 10% above 5 lakh4%4%
7.5 lakh to  10 lakh37,500 + 15% above 7.50 lakh37,500 + 15% above 7.5 lakh4%4%
10 lakh to 12.5 lakh 75,000 + 20% above 10 lakh75,000 + 20% above 10 lakh4%4%
12.5 lakh to  15 lakh 1,25,000 + 25% above  12.5 lakh1,25,000 + 25% above 12.5 lakh4%4%
Above  15 lakh 1,87,500 + 30% above 15 lakh1,87,500 + 30% above 15 lakh4%4%

Also Read: 6 Pension Schemes for Senior Citizens Offered in India

  • Exemption from Filing Income Tax Returns

Finance Minister Nirmala Sitharaman announced that any taxpayer of and above the age of 75 with only interest and pension as sources of income does not need to file an income tax return. This is to reduce the compliance burden on our elderly citizens.

It should be noted that they are only exempted from filing a tax return and not from paying taxes.

  • Cap on Surcharge

The Union Budget 2022 also announced a cap on surcharge applicable on long-term capital gains (LTCG) arising from the sale of any capital asset at 15%. Previously, the surcharge could go as high as 37% depending on the income of the individual. A surcharge is an additional tax imposed on taxable income above ₹ 50 lakh.

Thus, senior citizens redeeming their investments or selling their property would save on taxes if they fall in a high tax slab.

  • Relief for COVID-19 Treatment

Financial assistance received by an individual from any person for their own medical treatment or treatment of any family member for any illness related to COVID-19 is exempt from tax.

Similarly, financial assistance received by a family member of a person deceased due to COVID-19 from the employer of the deceased person is exempt from tax provided it is received within 12 months of the death. Any other financial assistance received from a person other than the employer is also exempt and subject to a maximum exemption limit of ₹ 10 lakh.

Also Read: 7th Central Pay Commission

Shortcomings of the Union Budget Regarding Senior Citizens 

The economic slowdown caused during the pandemic, increasing inflation, and the current downside in the stock market have harshly exposed the economic vulnerability of  the elderly community of our society in the past few years. A high rate of attrition in India Inc. has also led to a decrease in family income and even fewer income opportunities. 

These are some of the expectations from the Union Budget 2022 that could have made the situation better for elderly citizens:

  • Section 80TTB of the Income-tax Act, 1961 provides a tax deduction in respect of interest on deposits to senior citizens up to a maximum limit of ₹ 50,000. Many senior citizens expected that the deduction limit under Section 80TTB would be increased, keeping the inflation rate in mind. Moreover, the applicability of Section 80TTB could have been extended to the National Savings Certificate Scheme as well. 
  • Lock-in or maturity period for some investment plans could have been lowered, considering the age and need for liquidity. For example, savings plans such as tax-saving fixed deposits and ELSS have a lock-in period of 5 and 3 years, respectively. There could have been a decrease in this period, making it a uniform 3 years lock-in period for all investments.
  • Keeping in mind the pandemic situation and also the ever-increasing hike in medical expenditure, there could have been an increase in medi-claim deduction. 

Currently, there is a deduction limit of up to ₹ 50,000 for any mediclaim or health insurance policy expenditure under Section 80D. This amount could have been increased considering the undeniable rise in individuals that had incurred medical expenses due to COVID-19. 

  • One of the most popular deductions that many taxpayers opt for is the deduction under Section 80C. This section states that payments made towards provident fund, life insurance premiums, ELSS, fixed deposits, etc., are eligible for a tax deduction up to a limit of ₹ 1,50,000. 

This limit was last revised in the Union Budget of 2014, and 8 years have passed since there has been any change. Taking into account the inflation rate, the limit could have been hiked, which could have given senior citizens some additional tax benefits.

The implication of the Union Budget on Senior Citizens

There had been many expectations regarding the Union Budget 2022 and anticipations from tax experts. But as there have not been many changes, those expectations still need to meet the final outcome. Hence, one can still hope that these factors will not be overlooked but covered in the upcoming Budget:

  • Currently, senior citizens are not required to pay tax on income of or below ₹ 3 lakh, the limit of which is of and below ₹ 5 lakh for super senior citizens. In Budget 2022, experts anticipated the limit for senior citizens would be revised and brought on par with that of the super senior citizens. This concern will supposedly be addressed in the upcoming Budget.
  • The disparity between tax treatments of annuity plans and other investment plans was expected to see a revision. For example, annuity plans are only eligible for deduction if 60% of the maturity amount is reinvested. Whereas, for investments made in fixed deposits, and mutual funds, only the gains are taxed, not the principal amount. Some financial experts felt that this inequality of tax treatment should be omitted to promote asymmetry in retirement planning for every individual. 

Final Word

Even though the Finance Minister had said that the tax system would be simplified and the tax rate lowered, there were no such changes in the Union Budget 2022. For senior citizens, the relief or additional deductions have fallen short of expectations. However, one can hope that there will be some respite in the upcoming Budget, considering the consistent hikes in inflation rates and medical expenditures. 

Frequently Asked Questions

How can I opt for the new tax regime?

If you have no business or professional income, you can  opt for the new tax regime along with your income tax return, and you can change your selection between the two tax regimes every year. If you have a business or professional income, the option selected can be withdrawn only once a year other than the year in which the option was exercised.

What is the rate of surcharge applicable to me?

The rate of surcharge applicable to you would depend on your taxable income. The different rates apply as follows:

10% on taxable income above ₹ 50 lakh and up to ₹ 1 crore
15% on taxable income above ₹ 1 crore and up to ₹ 2 crore
25% on taxable income above ₹ 2 crore and up to ₹ 5 crore
37% on taxable income above ₹ 5 crore

Was this article helpful?
YesNo

Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The article may also contain information which are the personal views/opinions of the authors. The information contained in this article is for general, educational and awareness purposes only and is not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision, whether related to investment or otherwise, taken on the basis of this article.