Being a senior citizen has its advantages. In what could come as a bonanza for the elderly, the government is examining a proposal to reduce the threshold age for tax exemption purposes from 65 to 60 years. With the reduction in this threshold, senior citizens would be able to avail of larger tax benefits on instruments like the Senior Citizens Savings Scheme and other bank deposits.
The move to lower the age limit will also align it with the banking system, where the age threshold for availing benefits by senior citizens is 60 years.
The revenue department is examining the issue and it is expected that it will be a Budget gift for the elderly from finance minister P Chidambaram. Earlier this year, Mr Chidambaram had drawn flak for making it compulsory for banks to deduct tax at source on interest income accruing to senior citizens. Lowering the age limit is expected to somewhat blunt the criticism.
Currently, senior citizens avail of benefits from various arms of the government. However, there is lack of uniformity as different departments have set the qualifying age bar at different levels. While for Indian Railways, the age for getting benefits of senior citizens is 60 years, for airlines, it is 65. In the same manner, in banks, senior citizen benefits, like higher interest rate, are available at the age of 60.
At present, a senior citizen pays tax on income only if it exceeds Rs 1,85,000. This is against Rs 1,00,000 applicable to all other individuals. Besides, a senior citizen is also eligible for tax breaks for self or any family member, who pays premium to secure medical insurance of a dependent senior citizen. The break allows deduction from taxable income up to an amount of Rs 15,000 (limit in case of other individuals is Rs 10,000).
Further, a senior citizen himself or herself or any family member who incurs any expenditure on the medical treatment of specified disease of dependent senior citizen, is eligible to claim deduction from taxable income up to Rs. 60,000. This is Rs 40,000 in case of other individuals.
According to Govardhan Purohit, executive director, PricewaterhouseCoopers, considering the increase in the cost of living and medical treatment, the basic limit of exemption may be increased to Rs 2,50,000, from the current level of Rs 1,85,000. Similarly, the medical premium limit may be increased from Rs 15,000 to Rs 25,000 and expenditure on medical treatment from Rs 60,000 to Rs 1,50,000 for senior citizens for taxation purposes.
The government may also examine the threshold in other areas to bring about uniformity on the issue. It may be noted that the ministry of social justice is also working on a policy for the old.