Senior Citizens Get Key Tax Relief in Union Budget 2025

New Delhi: In a bid to offer more financial relief to senior citizens, Finance Minister Nirmala Sitharaman announced several key tax changes in the Union Budget 2025, including higher tax deductions on interest income and easier withdrawal rules for select savings schemes.

Presenting the budget in Parliament on Saturday, Sitharaman outlined proposals aimed at rationalizing the Tax Deduction at Source (TDS) system. This includes reducing the number of rates and raising threshold limits, providing greater clarity and ease of compliance.

One of the significant announcements was the doubling of the tax deduction limit on interest income for senior citizens, which has been raised from Rs 50,000 to Rs 1 lakh. This change is expected to benefit retirees who rely on interest income from their savings.

Additionally, the TDS threshold for rent payments has been increased from Rs 2.40 lakh to Rs 6 lakh per annum, which will ease the tax burden for elderly taxpayers.

In response to concerns from senior citizens with older National Savings Scheme (NSS) accounts, Sitharaman announced a provision to exempt withdrawals made from these accounts on or after August 29, 2024. This move comes as many such accounts no longer accrue interest.

The Finance Minister also introduced a change regarding the National Pension System (NPS), stating that Vatsalya accounts for senior citizens will now be treated the same as regular NPS accounts, subject to the same tax limits.

Ahead of the Budget, senior citizens had hoped for increased tax exemptions and revised interest rates on savings schemes. For the fiscal year 2024-25, the basic exemption limit for senior citizens is Rs 3 lakh under both the old and new tax regimes, while super senior citizens (aged 80 and above) are eligible for a Rs 5 lakh exemption, but only under the old regime.

There had been widespread expectations that the government would raise these limits to counter rising inflation and provide more relief to senior citizens, most of whom depend on pension and interest income. Financial experts had suggested a higher exemption limit of Rs 10 lakh per annum to further ease the financial burden on this demographic.

In a significant move last year, the government simplified the tax filing process for senior citizens aged 75 and above, exempting them from filing returns if they met specific conditions, such as receiving income solely from pensions and interest on savings.

Ahead of the 2025 budget, there were calls for extending this benefit to those aged 70 and above to benefit more senior citizens. There were also speculations that the government would raise tax exemptions on interest earned from savings schemes like the Senior Citizens Savings Scheme (SCSS) and post-office savings accounts, which are vital to many retirees.

This year’s Budget provides some much-needed relief to senior citizens, especially those dependent on fixed income sources, by increasing tax breaks and simplifying the financial system for them.