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How to save tax under the provisions of the 2018 Budget

  • Highlights

  • The 2018 Budget is being seen as benevolent to senior citizens

  • Tax sops on interest earned from FDs for senior citizens has been raised to Rs.50,000

Presenting his last full Budget before general elections next year, Finance Minister Arun Jaitley announced a slew of measures affecting one's personal finance. Income Tax slabs were left unchanged and the Budget gave senior citizens ample reasons to rejoice. The Finance Minister tried to maintain a fine balance between a pragmatic and populist Budget. Though several announcements made did ruffle investors’ feathers, here’s how the declarations made in Budget 2018 may help you save tax.

Increase in tax benefits on interest earned from fixed deposits

Since time immemorial, Fixed Deposits (FDs) have been one of the most favoured investment tools for Indians, particularly senior citizens who park a major chunk of their retirement corpus into this form of investment. Being fixed-return generating instruments unaffected by market volatility, many senior citizens depend on interest earned from FDs for income post-retirement.

However, the interest earned from FDs are taxable. In a major relief to senior citizens, the Budget has proposed to increase the tax benefits on interest income earned from FDs to Rs.50,000 from the current Rs.10,000. You can also avail the benefit by making an FD investment in the name of your senior parents and avail tax benefits on interest income up to Rs.1 lakh (for both parents).

Tax benefits on health insurance premiums

In another major announcement during the Budget speech, the Finance Minister explained enhanced tax benefits on health insurance premiums for senior citizens. Health insurance premiums are eligible for tax deductions under section 80D of the Income Tax Act 1961. The Budget has proposed to increase the tax sops on health insurance premiums for senior citizens from Rs.30,000 to Rs.50,000.

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Bringing all senior citizens under one umbrella, the Budget has increased tax exemption on health insurance premiums for certain specified diseases (critical illnesses), to Rs.1 lakh from the current Rs.60,000 (for senior citizens) and Rs.80,000 (for very senior citizens). You are eligible to avail this benefit if you pay premiums on behalf of your senior parents.

Tax Exemption of 40% on NPS Corpus for Non-Salaried Subscribers

If you are a non-salaried subscriber making contribution to the National Pension System (NPS), Budget 2018 has announced tax-free withdrawal of 40% on your NPS corpus. This was not available earlier. So, now even if you are a non-salaried subscriber, you will be able to enjoy tax sops at par with salaried individuals.

The NPS, administered by the PFRDA, was initially aimed only for Government employees. However, it was opened for all citizens in 2009.

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