Union budget has left senior citizens high and dry

A first glance at the budget may indicate that it has done more than needed for the senior citizens. However, as you get deeper into it, the euphoria fades.

DNA takes a closer look at the provisions relevant for senior citizens.

Reduction in age limit to 60 years
The government has reduced the age limit of senior citizens from 65 to 60 years. To be eligible for the senior citizen benefits, one has to complete 60 years of age by March 31, 2012. This has created more number of senior citizens.

However, instead of only lowering the age limit, an increase in the interest rate on the senior citizen scheme, which is still 9%, would have done more good.

“This is just a stop gap measure used until DTC (direct tax code) will commence on April 1, 2012. The government just seems to be buying time,” said Jayant Pai, vice president of Parag Parikh Financial Advisory Services Ltd.

If the number of senior citizens increases, the avenues for them should also expand. The interest rate for senior citizen scheme is not on par with the bank rates and remains unlinked to inflation. The holder cannot even break it and deposit it in the bank.

Currently, the fixed deposit rates offered by ICICI and SBI for 8-10 years are 9.25% for senior citizens. This is higher than the Senior Citizen Savings Scheme which gives 9% for a five-year investment.

“Since the interest on it is also taxable, they should have increased the 9% to comfortable levels,” said Nikhil Naik, managing director of Naik Wealth.

“Rate of interest at 9% is not sufficient to meet the daily expenses including the increasing medical expenses. The additional benefit of only 0.5% to 7.5% is not enough,” said Renu Pothen, research manager, Fundsupermart.com

“I have been deceived by my husband and son thus having no financial support. So obviously for a senior citizen like me the government has not empowered me in anyway. It is difficult to fight the rising medical inflation when investment avenues like the Senior Citizen Savings Scheme are still capped at 9% which is even lower than the FDs offered by banks.” said 65-year-old Renuka Sanghavi residing in Andheri (east), Mumbai.

Very senior citizens
The finance minister has introduced the very senior citizen category for 80 years and above. They will have an exemption for upto Rs5 lakh.

The very senior citizen category looks more as a marketing gimmick. According to Indiastat.com, for 2011-15, the projected average life expectancy of Indian males is only 67 against 69 of Indian women. So there will be less number of people who can actually avail the benefit.

“It is a good move. However, 80 years looks too high considering our life expectancy is so low. Instead, the government should have capped it at 70 or 75 years so that many of them could enjoy its benefits,” said Naik.

He also added that the exemption upto Rs5 lakh is high as there will be very few senior citizens earning that much. In addition, most children transfer money from India or abroad to their parents for their living expenses, hence it shows that they are dependent and not on their own.

“The very senior citizen section is innovative, but may not be helpful in the long run because 80 years looks too long a life to enjoy those benefits. The gap between senior citizens and very senior citizens is wide, hence, it should have been lowered to a more comfortable age limit. This move will neither be of use to the very senior citizens nor the government.” said a 64-year-old senior citizen from Andheri (west), requesting  anonymity.

Exemption limit
The basic exemption limit for the senior citizen has been raised from Rs2.4 lakh to Rs2.5 lakh. The increase in no-tax limit by Rs10,000 serves no real purpose.

“A mere increase of Rs10,000 is no good. The tax burden should be lessened at least beyond the retirement. The exemption limit should have been raised to Rs5 lakh,” said Raunak Roongta, independent financial planner in Mumbai.

“The tax exemption limit of Rs2.5 lakh is not sufficient. We feel that the government should do more for this category of citizens, for whom even social security benefits are not available similar to the US,” said Pothen at Fundsupermart.com.