Deduction in respect of interest income to senior citizen

At present, a deduction upto ₹ 10,000/- is allowed under section 80TTA to an assessee in respect of interest income from savings account. It is proposed to insert a new section 80TTB so as to allow a deduction upto ₹ 50,000/- in respect of interest income from deposits held by senior citizens. However, no deduction under section 80TTA shall be allowed in these cases.

This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

It is also proposed to amend section 194A so as to raise the threshold for deduction of tax at source on interest income for senior citizens from ₹ 10,000/- to ₹ 50,000/-.

This amendment will take effect, from 1st April, 2018.

[Clause 29, 30 & 47] Standard deduction on salary income

Section 16, inter-alia, provides for certain deduction in computing income chargeable under the head “Salaries”. it is proposed to allow a standard deduction upto ₹ 40,000/- or the amount of salary received, whichever is less. Consequently the present exemption in respect of Transport Allowance (except in case of differently abled persons) and reimbursement of medical expenses is proposed to be withdrawn.

These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

[Clause 7 & 8]

Interest deduction for senior citizens expanded, with higher TDS threshold; standard salary deduction introduced, replacing certain allowances. A new deduction specifically for senior citizens will cover interest on deposits and displace the existing savings account interest deduction for them while the threshold for withholding tax on interest paid to senior citizens is raised. Separately, a standard deduction for salary income is introduced up to a prescribed limit or the salary amount, and exemptions for transport allowance (with an exception for differently abled persons) and medical reimbursement are withdrawn.