Increased Tax Deduction on Interest Income: The limit has been raised from ₹50,000 to ₹1 lakh, easing the financial burden on senior citizens.
Tax-Free NSS Withdrawals: Withdrawals from old National Savings Scheme (NSS) accounts will be tax-exempt from August 29, 2024, as these accounts no longer earn interest.
NPS Vatsalya Tax Benefits: Senior citizen-specific NPS accounts will now receive the same tax treatment as regular NPS accounts.
The Union Budget 2025 introduced significant tax benefits for senior citizens, announced by Finance Minister Nirmala Sitharaman. The key highlights include an increased tax deduction limit on interest income, simplified Tax Deduction at Source (TDS) rules, and tax exemptions on old National Savings Scheme (NSS) withdrawals.
Tax-Free Withdrawals from Old NSS Accounts
Sitharaman clarified that withdrawals from National Savings Scheme (NSS) accounts will be tax-free starting August 29, 2024, as these accounts no longer accumulate interest. The NSS-87 scheme, launched in 1987, was discontinued in 1992, followed by NSS-92, which ceased in 2002. These accounts will bear zero interest from October 1, 2024, as per a finance ministry notification. However, these schemes should not be confused with the National Savings Certificate (NSC), which remains unchanged.
The government also announced that NPS Vatsalya, a pension scheme for senior citizens, will now be taxed similarly to regular National Pension System (NPS) accounts. This move aims to enhance financial security for elderly individuals without adequate pension coverage.
Conclusion:
The Budget 2025 introduces essential tax relief measures for senior citizens, promoting savings and reducing tax liabilities. With higher deduction limits, tax-free NSS withdrawals, and improved NPS benefits, these changes are expected to provide greater financial stability for retirees.
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