The Union Budget 2025 has introduced major tax relief for senior citizens, focusing on higher TDS exemption limits, tax-free withdrawals from the National Savings Scheme (NSS), and increased standard deduction under the new tax regime.
With the new tax regime now offering zero tax up to ₹12 lakh, these changes provide better financial security and higher post-tax income for retirees. Here’s a detailed breakdown of what senior citizens got from Budget 2025.
1. No Tax Up to ₹12 Lakh Under the New Tax Regime
The new income tax regime introduced in Budget 2025 provides a zero-tax benefit for total income up to ₹12 lakh.
🔹 Tax slabs applicable under the new regime (FY 2025-26):
| Total Income (₹ in Lakhs) | Tax Rate (%) |
|---|---|
| 0 – 4 | 0% |
| 4 – 8 | 5% |
| 8 – 12 | 10% |
| 12 – 16 | 15% |
| 16 – 20 | 20% |
| 20 – 24 | 25% |
| Above 24 | 30% |
🔹 Key Benefits for Senior Citizens in the New Regime:
✅ No tax on income up to ₹12 lakh due to rebate under Section 87A (except for special-rate incomes like capital gains and lottery winnings).
✅ Standard deduction of ₹75,000 on Salary & Pension income
📌 Impact: This makes the new tax regime more attractive for senior citizens, especially pensioners who may not have high deductions under the old regime.
2. Higher TDS Exemption Limit on Interest Income (Section 194A)
Budget Speech: The limit for tax deduction on interest for senior citizens is being doubled from the present ` 50,000 to ` 1 lakh. Similarly, the annual limit of ` 2.40 lakh for TDS on rent is being increased to ` 6 lakh. This will reduce the number of transactions liable to TDS, thus benefitting small tax payers receiving small payments.
Previously, banks and post offices deducted TDS on interest exceeding ₹50,000 per year for senior citizens. Budget 2025 doubled this limit to ₹1,00,000 per year, meaning:
📌 Impact: Senior citizens relying on interest income will face fewer TDS deductions and enjoy higher take-home income.
3. Increased TDS Exemption on Rental Income (Section 194I & 194IB)
Earlier, TDS on rent was deducted if the annual rent exceeded ₹2,40,000. Now, the threshold has been increased to ₹50,000 per month (₹6,00,000 per year), aligning it with Section 194IB.
✅ No TDS on rent payments up to ₹50,000 per month.
✅ Applies to individuals and HUFs renting out property.
📌 Impact: Senior citizens earning rental income will now receive a higher post-tax amount, reducing the impact of TDS deductions.
4. Full Tax Exemption on Withdrawals from National Savings Scheme (NSS) (Section 80CCA)
Budget Speech: 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 the 29th of August, 2024. I am also proposing to allow similar treatment to NPS Vatsalya accounts as is available to normal NPS accounts, subject to overall limits.
A major relief has been granted to senior citizens holding old NSS accounts, addressing concerns over taxation on withdrawals.
🔹 Earlier Rule:
- Deposits made before April 1, 1992, under NSS were eligible for deduction.
- However, at the time of withdrawal, the entire amount, including interest, was taxable.
🔹 New Rule (Effective August 29, 2024):
- Withdrawals of NSS deposits (principal + interest) will now be fully tax-exempt.
- This exemption applies retroactively to withdrawals made on or after August 29, 2024.
- Legal heirs will also receive this benefit in case of the depositor’s death.
📌 Impact: This provides huge relief to senior citizens who were forced to pay tax on old NSS withdrawals despite not earning interest on balances after October 1, 2024.
5. Standard Deduction of ₹75,000 on Pension Income
Standard deduction for pensioners of ₹75,000, is also available in case of Pension income so pensioners can now save tax on Rs.12.75 Lakh
6. No Changes in Deductions Available Under the Old Tax Regime
Senior citizens opting for the old tax regime can continue to claim the following tax deductions:
🔹 Section 80TTB: Deduction of ₹50,000 on interest income.
🔹 Section 80D: Deduction on medical insurance premium up to ₹50,000.
🔹 Section 80DDB: Deduction for medical treatment of specified diseases up to ₹1,00,000.
🔹 Section 24(b): Deduction of ₹2,00,000 on home loan interest.
✅ No tax payable under the new regime!
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