New Delhi: Some tax relief measures have been introduced in the budget for senior citizens, including an increased tax deduction limit on interest income and more relaxed withdrawal rules for select savings schemes. The Finance Minister also proposed rationalizing Tax Deduction at Source (TDS) by simplifying the number of rates and raising threshold limits for greater clarity and consistency.

The tax deduction limit on interest income has been doubled for senior citizens from Rs 50,000 to Rs 1 lakh, allowing retirees to keep more of their money from savings schemes like fixed deposits. For others, the limit for TDS has been increased to Rs 50,000 from the current Rs 40,000. The threshold for TDS on rental income has been raised —from Rs 2.4 lakh to Rs 6 lakh per year. For those who hold older National Savings Scheme (NSS) accounts, the government has exempted withdrawals made after August 29, 2024 from penalties, especially for accounts under NSS-87 and NSS-92.

"A number of senior and very senior citizens have very old National Savings Scheme accounts. As interest is no longer payable on such accounts, I propose to exempt withdrawals made from NSS by individuals on or after August 29, 2024," Sitharaman said.

Although these schemes were discontinued many senior citizens hold such accounts. Starting from October 1, 2024, these accounts will earn 0% interest, but seniors will be able to make penalty-free withdrawals. Another reform in the pension sector is the equal treatment of NPS Vatsalya accounts with regular National Pension System (NPS) accounts. In other words, it will receive the same tax benefits as regular NPS accounts, subject to overall contribution limits.

Sitharaman said the threshold amounts for tax deduction will be increased for better clarity and uniformity, she added. She also announced that the threshold to collect tax at source (TCS) on remittances under RBI's Liberalized Remittance Scheme (LRS) is proposed to be increased from Rs 7 lakh to Rs 10 lakh.

Union Finance Minister Nirmala Sitharaman Announces Removal of TCS On Remittances For Education Purposes

"I also propose to remove TCS on remittances for education purposes, where such remittance is out of a loan taken from a specified financial institution," Sitharaman said. Currently, both TDS and TCS are being applied on any transaction relating to the sale of goods. To prevent such compliance difficulties, Sitharaman proposed to omit the TCS. TDS is applicable to deductions from payments made for goods and services, while TCS is the tax that sellers collect from buyers at the time of sale.