Tax Benefits for Senior Citizens in Budget 2025: What You Need to Know

The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, introduced several income tax measures that provide significant financial relief to senior citizens in India. From an increased tax-free income limit to relaxed TDS norms, these changes will come into effect from the financial year 2025-26 (assessment year 2026-27). Here’s a breakdown of the key benefits:

1. Higher Tax-Free Income Limit

One of the biggest announcements in Budget 2025 was the increase in the basic income exemption limit from ?7 lakh to ?12 lakh for resident individual taxpayers. This means that senior citizens earning up to ?12 lakh annually will not have to pay any income tax, significantly reducing their tax burden.

2. Tax-Free Withdrawals from National Savings Scheme (NSS)

In a major relief for NSS account holders, Budget 2025 has amended Section 80CCA, making all withdrawals from the National Savings Scheme (NSS) tax-free from August 29, 2024. Previously, tax exemption was only available when the NSS account was closed due to the account holder’s death.

3. Increased TDS Deduction Limit on Interest Earned

For senior citizens earning interest from fixed deposits, savings accounts, and other non-security instruments, the TDS deduction limit has been raised from ?50,000 to ?1,00,000. This means that if the total interest earned in a year does not exceed ?1 lakh, no TDS will be deducted.

4. Increased TDS Deduction Limit on Rent Income

Senior citizens who earn rental income will benefit from the revised TDS deduction limit on rent payments, which has been increased from ?2.4 lakh per annum to ?6 lakh per annum (?50,000 per month). This move will help many seniors who rely on rental income for their livelihood.

5. No Higher TDS/TCS for Non-Filers of Income Tax Returns

The government has repealed Sections 206AB and 206CCA of the Income Tax Act, which imposed higher TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) rates on individuals who did not file their income tax returns in the previous year. This change, effective from April 1, 2025, will benefit senior citizens who may miss filing their returns due to various reasons.

6. No Tax Exemption Changes for Senior Citizens Aged 75+

There were no changes in the tax exemption rules for senior citizens aged 75 years and above. They will continue to be taxed as per the existing slabs. However, those who earn only from pension and interest (from the same bank where they receive their pension) remain exempt from filing income tax returns.

Final Thoughts

The Budget 2025-26 has introduced several tax relaxations that will ease the financial burden on India’s senior citizens. The hike in the tax-free income limit, tax-free NSS withdrawals, and higher TDS deduction limits on interest and rent are significant steps toward ensuring financial security for the elderly.

With these reforms, senior citizens can better plan their finances and enjoy their retirement with fewer tax-related worries.