Senior citizen? Here's how Budget 2025 will impact retired persons and pensioners

Presenting the Budget in Parliament, Sitharaman proposed to rationalize Tax Deduction at Source (TDS) by reducing the number of rates and increasing threshold limits for better clarity and uniformity.

The TDS threshold on rent payments has been raised from ₹2.40 lakh to ₹6 lakh per annum, easing compliance for many elderly taxpayers.

"A number of senior and very senior citizens have very old National Savings Scheme accounts. As interest is no longer payable on such accounts, I propose to exempt withdrawals made from NSS by individuals on or after August 29, 2024," Sitharaman said.

The finance minister announced that NPS Vatsalya accounts will receive the same tax treatment as regular National Pension System (NPS) accounts, subject to overall limits.

What senior citizens expected before Budget 2025

Ahead of Budget 2025, senior citizens were looking forward to higher tax exemptions and a revision in interest rates on savings schemes.

For FY 2024-25, the basic exemption limit for senior citizens is ₹3 lakh per annum under both the old and new tax regimes.

Super senior citizens (aged 80 and above) enjoy the exemption benefit of ₹5 lakh in a financial year, but only under the old regime.

Expectations were rife this time that the government would raise these limits due to rising inflation. Experts were also suggesting raising the exemption limit to ₹10 lakh per annum to provide tax relief to senior citizens, who mostly depend on pension and interest earnings from savings.

In the Union Budget 2024, Finance Minister Niramala Sitharaman simplified the tax filing process for senior citizens aged 75 and above and said that those meeting specific conditions — such as receiving income only from pensions and interests on savings—are exempt from filing income tax returns.

Financial planners were of the view that this age threshold should to be lowered to 70 years in the Union Budget 2025 to bring relief to more senior citizens.

Besides that, there were also speculations that tax exemptions might be increased on the interest earned from senior citizens’ savings schemes (SCSS) and post-office savings accounts in the Union Budget 2025.

Considering that most senior citizens are dependent on these financial products to meet their day-to-day expenses, offering tax exemptions for such savings would have provided a major relief to pensioners.