Budget 2025-26: Tax Expectations For Senior Citizens

Union Finance Minister Nirmala Sitharaman will present the budget for FY2025-26 on February 1, 2025. The last budget did not offer specific tax relief to seniors and while the government launched the Ayushman scheme this year for all seniors aged 70 and above, there is more to be done.

Although there are some tax benefits specifically for senior citizens (60 years and above) already, they remain limited. Current provisions include exemptions under Section 194P of the Income Tax Act, 1961, which allows individuals aged 75 and above, with income solely from pension and interest in the same bank, to be exempt from filing an income tax return (ITR). Additionally, seniors enjoy higher deductions under Section 80D for medical insurance and are exempt from paying advance tax under Section 207 if they do not have income from "Profits and Gains of Business or Profession", and a higher basis exemption limit in the old tax regime, among others. These tax provisions are one of the few benefits that offer some financial relief to seniors in their golden years.

As the Union Budget 2025 approaches, various groups are voicing their expectations. Below, we explore key tax-related benefits that seniors hope to see in the upcoming budget.

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Budget Expectations For Seniors

Linking TDS with Tax Liabilities: Sudhir Kaushik, Co-Founder and CEO of Taxspanner suggests, “To avoid unnecessary tax deductions, the threshold for Tax Deducted at Source (TDS) on interest income should be aligned with seniors’ actual tax liabilities. With digital access to seniors’ income data, the government could eliminate the need for submitting Form 15H and allow banks to apply appropriate TDS rates.”

Exemption From ITR Filing: Currently, ITR exemption is available for individuals aged 75 and above. However, since most people retire at 60, experts suggest lowering the age limit for this exemption. Retirees with no income source other than pension and interest could be exempted from filing ITR at an earlier age to ease compliance for senior citizens.

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Basic Exemption Limit: Under the old tax regime, the basic exemption limit is Rs 3 lakh for seniors and Rs 5 lakh for super seniors (80 years and above). In contrast, the new tax regime offers no separate benefit for seniors, with the exemption limit being Rs 3 lakh for all age groups. Experts propose increasing the limit for seniors to Rs 7 lakh, considering high inflation and the fact that nearly 78 per cent of seniors in India live without pension coverage.

Section 80D Deduction: Seniors currently receive a Rs 50,000 deduction on medical insurance premiums. With medical inflation running at around 12-14 per cent, experts recommend increasing the deduction limit to Rs 1 lakh.

Kaushik adds, “The limit, last revised in 2018, should be increased to Rs 1,00,000 under Section 80D to keep pace with inflation.” He also suggests raising the deduction for specified illnesses: “For medical treatment of critical illnesses like cancer and chronic renal failure, the current limit of Rs 1,00,000 should be doubled to Rs 2,00,000, helping seniors manage healthcare costs.”

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Interest Income Threshold: Fixed deposits are a preferred investment for seniors due to their guaranteed returns. However, the current tax treatment of interest income reduces their real earnings significantly. Kaushik recommends increasing the deduction limit under Section 80TTB from Rs 50,000 to Rs 1,00,000, citing inflation and rising healthcare expenses as key reasons for this revision.

In India, pension security remains inadequate, with only a minority of retirees receiving sufficient pensions, primarily government employees covered under the old pension scheme. Inflation continues to erode purchasing power, making it vital to introduce targeted tax reliefs for senior citizens to reduce their financial burden. As the government prepares to present the Union Budget 2025, seniors hope for measures that will provide them with greater financial security and stability in their retirement years.