Union Budget 2021 Expectations for Senior Citizens: In pretty much every single price range workout, the government has been taking methods to make a good effect on the lives of senior citizens. As generally, the Budget 2021, to be announced by Finance Minister Nirmala Sitharaman, will be keenly watched by the senior citizens. The government and the RBI have been taking methods to retain the interest price low to help development in the nation. And, this is hurting the retired investors as falling interest prices in 2020 have hit them. Most senior citizens bank upon fixed earnings investments to meet their frequent earnings desires. Bank fixed deposits, in all probability the initial decision of most senior citizens, is at present supplying a price of interest of much less than 6 per cent per annum across distinct tenure.
Further, the interest earnings earned from bank fixed deposits is taxable in the hands of the investor. “In the last couple of years interest rates on fixed income came down drastically, as a result, most senior citizens suffered a loss of income. The government should enhance some of the tax breaks, including increasing the exemption limit on interest income for senior citizens so that some portion of their income can be restored,” says Col Sanjeev Govila (Retd), a SEBI Registered Investment Advisor (RIA), and CEO, Hum Fauji Initiatives, a monetary preparing firm which caters exclusively to the Armed Forces officers and their households.
Exempting pension earnings
Still, a larger element is about the taxability of the earnings earned by investors on the investments. The senior citizens, particularly these who are retired, need to have a frequent earnings to meet their household costs. Those who are 60 years or above have quite a few investments to select from, but not all of them provide frequent interest payments on the deposits. Some senior citizen investment possibilities offering frequent earnings payments consist of bank fixed deposits, Pradhan Mantri Vaya Vandana Yojana (PMVVY), Post Office Monthly Income Scheme (POMIS), Senior Citizen Saving Scheme ( SCSS), Immediate Annuity plans of life insurance coverage firms and Floating Rate Savings Bonds 2020.
The interest earnings from these investments is taxable in the hands of the investor in the year of receipt. “There is no specific pension or superannuation scheme designed for senior citizens, they must depend on their own investments and interest from FDs for meeting out their day-to-day needs. Hence, it is expected that an introduction of certain schemes tailored towards senior citizens making an income out of the said investment to be exempt while the government can use the same for long-term projects,” says Raghunathan Parthasarathy, Associate Partner – Tax & Regulatory Services, BDO India
Make annuity tax-free of charge
Annuity or pension received from NPS or any other pension scheme is completely taxable. Although the commuted quantity is tax-exempt, one particular desires to spend tax on annuity received on a month-to-month or yearly basis.
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“While commutation of a pension plan annuity is tax-free, there is no tax benefit on the annuity if not commuted. This encourages senior citizens to take a lot of annuity amounts in lump-sum which compromises their life in older years, thus negating the benefits of retirement planning. The government should provide tax-free benefits for an annuity or commuted amount, to bring both on the same scale,” says Col Govila (Retd).