Did the budget give senior citizens a fair deal?

The recent budget can truly be termed as the budget for senior citizens.

Let’s take a look at the provisions of budget proposals which are relevant for senior citizens, besides the ones which have not been amended in line with the intention of the budget proposals for the senior citizens. Also, the need to amend the provisions of direct tax code (DTC).

Reduction in age limit to 60 from 65 years
The finance minister has lowered the age limit for senior citizen category to 60 years from 65 years for availing the higher basic exemption limit for income tax purpose.

This is in line with the definition of senior citizen for the purpose of Senior Citizen Saving Schemes and with the general age of retirement in the country as it is generally mandatory for employees in the government and private organisations to retire at the age of 60.

After retiring from active earning phase, the ability to meet day-to-day expenses becomes a major issue for retired individuals with income on the money saved over the years.

Since only a few retired people opt for second career, the government has intended to give senior citizens an extra cushion in the form of extra tax-free income as compared to employed people when the provisions of higher tax exemption limit for person of 65 year and above was introduced.

However, the age limit of 65 years did not complement the general age of retirement for a lot of employees working in organised sectors.

Thus, the proposal to bring down the age from 65 to 60 years will align the age of senior citizen for income tax purpose with the general age of retirement in the country.

Hence, the finance minister has done a great service to the senior citizens.

As per the proposals placed before Parliament, a person who has completed the age of 60 years during any year will have to pay tax only if his taxable income exceeds Rs2.50 lakh.

Very senior citizen category
Very senior citizen category has been introduced in the budget for the persons who have completed 80 years of age during the year or earlier.

The basic exemption limit is proposed to be raised to Rs5 lakh for very senior citizens as against the regular limit of Rs2.50 lakh for other senior citizens.

The proposal on the face of it looks extremely well and beneficial but on minutely assessing the impact of this benefit, we realised that this is almost non-existent for all practical purposes.

As it will be quite difficult to find a person who is in this age bracket and has income of this magnitude to claim this benevolent provision granted.

Since 60% of the population of India is below 35 years of age, the percentage of very senior citizens will be miniscule.

If finance minister genuinely wants to show his empathy towards elders, he should be realistic and grant the benefits which are real and not illusory.

Hence, I would request finance minister to bring this limit of 80 years to if not to 70 then at least to 75 years in order to make it real and effective.

Changes desired, omitted due to oversight
In addition to the benefits of higher basic exemption limit of Rs2.4 lakh, the income tax also offer other benefits to persons who have completed 65 years of age like in Section 80 D a separate deduction of Rs20,000 is available for Mediclaim insurance premium.

In addition to this a deduction under Section 80DDB is also available up to Rs60,000 for medical treatment for certain specified diseases.

Not only this, they are entitled to submit form no 15 H as per the provisions of Income Tax Act, so that there is no tax deductions while making payment under Section 197 subject to fulfillment of certain conditions.

It is recommended that age limit under Section 80 D, 80DDB and 197 may be brought down to 60 years in line with the intention of the finance minister

Proposals in DTC
The proposals of this budget seem to be aligning with the direct tax code (DTC) though there are some provisions in DTC which are not senior-citizen friendly.

The issues were raised by me in one of my earlier articles in columns of DNA where I discussed that DTC should incorporate the provision for making some avenues available to senior citizens on the lines of present deduction under Section 80C.

As senior citizens do not have any avenues available under the proposed Section 69 of DTC.

This covers only EPF, PPF, pension funds and gratuity fund which can only be used by employed people and not by senior citizens.

Moreover, the DTC should have provision for submission of application for no deduction at source on the income being paid to or credited to them on the lines of present form no 15H presently.

To conclude here, we need to laud the good intentions of the FM, however, the provisions of the budget needs to be fine tuned to give real benefits to senior citizens, which is his intention actually!

Balwant Jain is CFO, Apna Paisa, a price comparison engine for loans, insurance and investments. He can be reached at balwant.jain@apnapaisa.com.