Budget 2020: Demand grows for full income tax rebate on Senior Citizen Savings Scheme

Budget 2020: Finance Minister Nirmala Sitharaman is going to present her second Union Budget on 1st February 2020. In this budget, she will have dual challenges — to boost the economy and give tax relief to the middle class. To hit multiple sparrows with a single arrow, Nirmala Sitharaman may increase income tax benefits under Section 80C and Section 80CCD. However, there are some demands from the Senior Citizens as well. When Nirmala Sitharaman stands to present the Budget 2020, senior citizens would be expecting her to announce a full tax rebate on senior citizen saving scheme.

Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI said, "There are around 41 million Senior Citizens term deposits accounts in the country with a total deposit of Rs 14 lakh crores or 7 per cent of India’s GDP. The average deposits size per account is around Rs 3.3 lakh and interest income from such deposits forms 5.5 per cent of Private Final Consumption Expenditure in FY19. It is imperative that the Government exempts such interest income from taxes or increases the threshold limit."

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Batting for full tax rebate to the Senior Citizen Saving Scheme Dr. Ghosh said, "Government has an excellent scheme for senior citizens. Under the Senior Citizens Savings Scheme (SCSS), a senior citizen can deposit Rs 15 lakh and the current interest rate is 8.6 per cent. However, the interest on SCSS is fully taxable which is a major drawback of this scheme (the interest amount for Rs 1 lakh deposit for 5 years is around Rs 51,000 which is taxable). The Mar’18 outstanding under SCSS was Rs 38,662 crore. It will be fair if such amount is given full tax rebate as the revenue foregone by the Government could be only Rs 3092 crores, that will have a minimal impact on Government fiscal deficit."

Standing in sync with Dr. Ghosh; CS Sudheer, CEO at IndiaMoney.com said, "The senior citizen basic exemption at Rs 3 Lakhs is too low. This needs to be increased to at least Rs 5 Lakhs a year." He went on to add that there is a need to enhance the purchasing power capacity of the earning individuals so that they can increase expenditure. Sudheer was of the opinion that once the Middle Class gets higher income, their increased spending capacity will boost the sluggishly moving national economy as well.