The Union Budget 2025 have brought good tax relief for pensioners across India.

Union Budget 2025:

The Finance Minister has announced a significant overhaul of the income tax structure under the new tax regime.

What Sitharaman said:  

A taxpayer with an income of Rs 12 lakh will now see a benefit of Rs 80,000 in tax savings, which accounts for 100% of the tax payable as per existing rates.

A person earning Rs 18 lakh annually will benefit from a tax reduction of Rs 70,000, which is 30% of the tax payable under the previous system.

For those with higher income, such as Rs 25 lakh, they will experience a tax benefit of Rs 1.10 lakh, reducing their tax payable by 25%.

For Pensioners there shall be Zero Tax Liability for Income up to ₹12.75 Lakh per annum under Section 87A.

Highlights:

Income tax relief for pensioners

  • Under the new tax regime, pensioners with an annual income up to ₹12,00,000 can get a rebate of ₹60,000 under section 87A.
  • This means that pensioners with a total income of up to ₹12,75,000, including a standard deduction of ₹75,000, will not pay income tax.
  • It will leave more money in the hands of pensioners.

The relief encourages to invest and spend, while acknowledging the financial challenges faced by pensioners. As inflation continues to rise, this step will allow Pensioners to a stable retirement.

Standard deduction In the case of family pension increased from 15000 to 25000;

₹ 25,000, or one-third of family pension whichever is less, is now allowed as a deduction.
For example, if a family member receives a pension of ₹78,000, the exemption available is ₹ 25,000 or Rs 26,000 (1/3rd of Rs 78,000), whichever is less. Therefore, the taxable family pension will be ₹ 78,000 – Rs 25000 =₹53000.

Doubling the Tax Deduction Limit on Interest Income

The tax deduction limit (TDS) on interest income for senior citizens has been doubled from ₹50,000 to ₹1 lakh. Retirees will may now to keep a larger share of their money from savings schemes like fixed deposits. This move is also a financial relief to pensioners who rely on interest income for their livelihood.

Simplified TDS Rules with Higher Thresholds

The annual rental income threshold for TDS has been raised from ₹2.4 lakh to ₹6 lakh . This means that many elderly people who depend on rental income will now be able to avoid TDS deductions, simplifying their tax filing process and reducing their compliance burden .

Exemption from Taxes on National Savings Scheme (NSS) Withdrawals

Starting from August 29, 2024, withdrawals from NSS accounts will no longer be subject to penalties, allowing senior citizens to access their funds without any extra costs or restrictions . This is particularly beneficial for those who hold accounts in schemes like NSS-87 and NSS-92, which no longer attract interest .

Equal Treatment for NPS Vatsalya Accounts

The budget also proposes equal treatment for NPS Vatsalya accounts with regular National Pension System (NPS) accounts. NPS Vatsalya accounts will be taxed in the same manner as regular National Pension System (NPS) accounts, within the overall limits.. This change is expected to help senior citizens build a more secure future by accumulating a retirement fund that will give regular income after retirement.

Conclusion

The Union Budget 2025 has made notable advancements in securing a stable retirement for pensioners in India. By doubling the tax deduction limit on interest income, simplifying TDS rules, and exempting NSS withdrawals, it tackles key financial concerns of senior citizens. These initiatives reflect the government’s dedication to supporting the elderly and ensuring they enjoy their retirement with dignity and peace of mind.

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