At the onset of a financial year, with a lot of enthusiasm, we all hear out the Budget, especially the personal finance section, announced by the finance minister. The budget of FY 2018-2019 has incorporated some new areas that can help you to save tax. As tax-saving time is here, so it is right for you to quickly know about the new introduced improvements or sections where you can save tax.
1. Tax-exempted medical premium increased from Rs. 30, 000 to Rs 50, 000 u/s 80 D, Income Tax Act, 1961.
This is applicable for senior citizens, who are of age 60. Till last financial year, the premium paid up to Rs 30, 000 towards health insurance for a senior citizen was tax-exempted. However, for this financial year, this tax-exempted limit has been raised to Rs. 50, 000. So now anyone (son, daughter, spouse or the sr.citizen himself/herself) who is paying the medical premium up to Rs 50,000 for a senior citizen can save tax up to Rs 15,600. Tax benefit calculated for the highest tax slab of 30% and includes 4% health and education cess.
2. NPS withdrawal made 100% tax-free
As per the proposal approved by the Union Cabinet, the government has offered complete tax exemption on 60% of the NPS corpus withdrawn on maturity. This has made NPS more tax friendly. NPS or National Pension System is a Govt. Of India initiated an investment tool for retirement planning. NPS investors can invest up to Rs. 1.5 lakh in NPS under Sec 80 C and additional Rs. 50, 000 under Sec 80 CCD (1B) of Income Tax Act, 1961. Under both the sections, the investor gets a tax deduction, which makes NPS a tax- saving investment tool during the ‘Investment Phase.’
Even during ‘Redemption Phase,’ NPS is a tax-efficient tool. At maturity, it is mandated to utilize the 40% of the corpus to buy an annuity that continues to give a regular income/ pension to the investors, while the remaining 60% of the corpus can be withdrawn by the investor as a lump-sum amount. Earlier only 40% of this withdrawal amount was tax-free while the remaining 20% was taxed. But now after the approval from Union Cabinet, there will be a complete tax exemption on this 60% of the withdrawn corpus amount.
3. Sr. Citizens can claim a tax deduction of up to Rs 50,000 u/s 80TTB
Budget 2018 introduced a new section – 80TTB under the Income Tax Act 1961, giving more tax-benefits to the senior citizens. Under this section, senior citizens can claim a tax deduction of up to Rs 50,000 on interest earned during a financial year from deposits held with a bank, a banking co-operative society or with a post office. Under this benefit, Rs. 50, 000 will get deducted from the gross annual total income before levying of a tax on it. A senior citizen, who is a resident individual aged 60 years or above during the financial year is eligible for claiming this deduction. However, not all interest income can be claimed as a deduction u/s 80TTB. Interest earned through the following are eligible for claiming deductions u/s 80TTB of Income Tax Act:
Fixed deposits or recurring deposits or other savings accounts held withheld with a bank, a banking co-operative society or with a post office
Other types of deposits with post offices such as
Senior Citizen Savings Scheme accounts
Post office time deposits
5-year recurring deposits
Post Office Monthly Income Schemes
4. Senior citizens need not to pay TDS on interest income up to Rs 50,000
As per the notification issued by The Central Board of Direct Taxes (CBDT), dated December 6, 201, it has been clarified that banks must not deduct any TDS from a senior citizen’s interest income in a single financial year up to Rs 50,000. Previously the limit of TDS deduction was Rs 10,000 per financial year irrespective of the age of the individual taxpayer.