Big Budget Relief For Senior Citizens: Tax-Free Interest Income Limit Raised To Rs 1 Lakh, Effective From THIS Date...

The enhanced TDS thresholds will apply from Financial Year 2025-26 i..e April 1, benefiting senior citizens investing in SCSS and bank/post office fixed deposits. Notably, the SCSS and fixed deposit schemes offered by banks and post offices are very popular among senior citizens. 

The enhanced TDS thresholds will apply from Financial Year 2025-26 i..e April 1, benefiting senior citizens investing in SCSS and bank/post office fixed deposits. Notably, the SCSS and fixed deposit schemes offered by banks and post offices are very popular among senior citizens.  

As per the budget documents, the senior citizens will not face TDS on interest income from bank and post office deposits if it remains below ₹1 lakh per year.

This exemption covers deposits in banks, post offices, and cooperative banks, ensuring broad benefits for senior investors. 

Currently, a TDS of 10% is deducted on interest income exceeding Rs 50,000 annually for senior citizens. For instance, if the interest earned from an SCSS deposit amounts to Rs 80,000 in a financial year, a TDS of Rs 8,000 is deducted. 

For non-senior citizens, the TDS threshold  for the banks, post office deposits, and co-operative banks will increase from Rs 40,000 to Rs 50,000 from FY 2025-26, reducing tax outflow on interest income. TDS can be claimed back by filing Income-tax Return (ITR) if the annual income is below the taxable limit.  

Under existing rules, income up to Rs 7 lakh is tax free under the new tax regime and up to Rs 5 lakh is tax-free under the old tax regime. From FY 2025-26, income up to Rs 12 lakh will be tax-free in the new regime while there will be no change in the old regime.  

If the total annual income falls below the taxable limit, the deducted TDS can be claimed back by filing an Income Tax Return (ITR). Under the new tax regime for FY 2025-26, income up to Rs 12 lakh will be tax-free, while the old tax regime remains unchanged, keeping the tax-free limit at Rs 5 lakh. (Image Credit: Freepik, File Photo)