In a significant move aimed at providing financial relief to senior citizens, the Union Budget 2025 has announced an increase in the tax-free interest income limit. Effective from April 1, 2025, the threshold for tax deduction at source (TDS) on interest income for senior citizens has been doubled from the previous ₹50,000 to ₹1 lakh.
Enhanced Financial Relief for Senior Citizens
This adjustment means that senior citizens will now enjoy a higher exemption on interest income earned from various deposit schemes, including those offered by banks, post offices, and cooperative banks. Consequently, interest earnings up to ₹1 lakh annually will not be subject to TDS, ensuring greater take-home income for senior investors.
Applicability Across Multiple Savings Instruments
The revised TDS threshold applies to a range of savings instruments popular among senior citizens, such as the Senior Citizens Savings Scheme (SCSS) and fixed deposits in banks and post offices. This move is anticipated to encourage more senior citizens to invest in these secure savings options, thereby enhancing their financial stability.
Additional Tax Reforms in Budget 2025
Beyond the increase in the TDS threshold for interest income, the Union Budget 2025 has introduced several other tax reforms:
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TDS on Rent Payments: The annual TDS limit on rent payments has been raised from ₹2.4 lakh to ₹6 lakh, providing relief to both tenants and landlords.
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Tax Exemption on National Savings Scheme Withdrawals: Withdrawals made from the National Savings Scheme by individuals on or after August 29, 2024, will be exempt from tax, offering additional financial flexibility to account holders.
Implementation Timeline
These revised TDS thresholds and tax exemptions will come into effect from the financial year 2025-26, starting on April 1, 2025. Senior citizens and other taxpayers are advised to plan their investments and tax filings accordingly to maximize the benefits from these changes.
Conclusion
The Union Budget 2025's decision to raise the tax-free interest income limit for senior citizens reflects a commitment to enhancing the financial well-being of the elderly population. By reducing the tax burden on interest income and introducing other supportive measures, the government aims to provide greater financial security and encourage savings among senior citizens.