Budget 2020:Senior Citizen Savings Scheme

Demand increases for full income tax rebate under the Senior Citizen Savings Scheme

Budget 2020: Finance Minister Nirmala Sitharaman will present her second Union budget on 1 February 2020. It will have a dual challenge in this budget— to boost the economy and give the middle class tax relief. In order to hit multiple sparrows with a single arrow, Nirmala Sitharaman may increase income tax benefits under Section 80C and Section 80CCD.

There are nearly 41 million senior citizens in the country with combined investment of Rs 14 Lakh Crores or 7% of India’s GDP. The average amount of deposits per account is around Rs 3.3 lakh and the interest income from such deposits is 5.5 per cent of the Private Final Consumption Expenditure for FY19. It is imperative that the Government exclude certain interest income from taxes or increasing the threshold.

The basic exemption for senior citizens in Rs 3 Lakhs is too poor. This needs to be increased to at least Rs 5 Lakhs per year.

Government has a very good 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%. Nevertheless, the interest on the SCSS is completely taxable, which is a major drawback to the scheme (the amount of interest on the Rs 1 lakh deposit for 5 years is approximately Rs 51,000 which is taxable)