Interest income up to Rs 50,000 exempt for senior citizens

SC Vasudeva

Q. I am a PSPCL pensioner. Recently on 02.02.2018, the Finance Minister had announced Rs 50,000 tax exemption on interest income for elderly. Kindly advise whether interest income is to be calculated from savings account or also interest income received from fixed deposit. — Ramesh Kumar

A. The Finance Act, 2018 has introduced a new Section 80TTB.  According to the provisions of the said section, a deduction to the extent of Rs 50,000 is allowable in case of a senior citizen in respect of interest earned from the bank, post office and cooperative society engaged in carrying on business of banking. This deduction is admissible for the assessment year 2019-20 i.e. financial year 2018-19.

Q. Kindly guide if a regular state government employee who is otherwise entitled to pension after retirement, can contribute towards National Pension Scheme in addition to the amount he is already contributing towards GPF, PPF? My income and deductions are as under:

1. Emoluments/income for the year:

Rs 8,30,000

2. Deductions:

(a) GPF contribution per annum: Rs 1,80,000

(b) PPF, LIC contribution pa: Rs 1,50,000

(c) Total: Rs 3,30,000

Deduction permissible: Rs 1,50,000

(d) NPS Contribution pa: Rs 50,000

Deduction permissible: Rs 50,000

3. Total deduction permissible from annual income: Rs 1,50,000+Rs 50,000= Rs 2,00,000

4. Taxable income: Rs 8,30,000-2,00,000= Rs 6,30,000

Kindly advise if the above calculation is correct. — Sushila Behl

A. Deduction under Section 80CCD (1B) of the Income-tax Act 1961 (The Act) to the extent of Rs 50,000 is allowable provided the amount has been contributed towards the National Pension Scheme notified by the Central Government. Therefore, the calculation made by you with regard to the deduction admissible from your total income is correct. Your net taxable income on the basis of the figures given in the query is Rs 6,30,000.

Q. This is with reference to a query with regard to the Income-tax Act raised by Tejinder Singh Kalra in The Tribune dated 26.02.2018. In the last doubt with regard to fixed medical allowance, please advise whether the said instructions are applicable from 01.04.2017 or 01.04.2018 and the section under which this deduction is to be shown. — SD Khurana

A. The reply to the query of Tejinder Singh Kalra is based on the provisions of Section 80D of the Act which provides for a deduction of medical expenses to the extent of Rs 30,000 incurred on the health of the assessee or any member of his family in case of a ‘very’ senior citizen for assessment year 2018-19 i.e financial year 2017-18 and to the extent of Rs 50,000 for a senior citizen for assessment year 2019-20 i.e financial year 2018-19.  The word ‘very’ has been deleted by the Finance Act, 2018. The amendment is applicable for assessment year 2019-20 as stated above.

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