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Senior citizens not cared for enough
March, 15th 2008

When Dr Manmohan Singh was Finance Minister, he realised the problems of senior citizens (persons of 65 years and more) in the country and decided to put surplus money in their pockets by giving them tax breaks. In his 1992-93 Budget speech, he observed: Taking note of the financial difficulties often encountered by persons in old age and as a token of my regard for such senior citizens, I propose to give a tax rebate of 10 per cent on the net tax payable by persons who have completed 65 years of age and whose gross total income is below Rs 50,000.

Later developments

Over the years, the quantum of the benefit was increased from time to time. Concern for the aged was reiterated again by Mr Jaswant Singh in his 2003-04 Budget speech: India will shortly become home to the second largest number of elderly persons in the world. The population of our elderly, at present estimated at 76 million, is expected to increase to 100 million in 2013. The interest of the pensioners and senior citizens are, therefore, a particular responsibility of the NDA Government.

Thus, the benefit for senior citizens was enhanced from Rs 15,000 to Rs 20,000.

While presenting the 2005-06 Budget, the Finance Minister, Mr P. Chidambaram, deleted Section 88B. He, however, started fixing a higher exemption limit for senior citizens for different years as can be seen from Table 1.

However, for assessment year (AY) 2009-10, the figures clearly show that the tax benefit is going to be drastically reduced to Rs 7,500, which is much lower than the Rs 20,000 tax credit given earlier.

Another surprise in the Finance Bill is that senior citizens have been discriminated against in the matter of exemption limit.

While in the case of general category of taxpayers and women taxpayers it is Rs 40,000 and Rs 35,000, respectively, in the case of senior citizens, it is only Rs 30,000. During a recent interactive session with FICCI, CBDT officials gave the following reasons for that:

The tax liability of senior citizens has been considerably reduced because of adjustments to the tax brackets.

Senior citizens have been entitled to insurance up to Rs 20,000 under Section 80D of the I-T Act.

The new tax brackets are provided for all categories of taxpayers and not merely for senior citizens (Table 2).

The figures in the Table are exclusive of education cess, which is same for all categories of taxpayers.

Thus, by adjustment of the tax brackets, no extra benefit, other than the Rs 7,500, is going to be derived by the senior citizens.

As regards insurance, it is illusory because most insurance companies are unwilling to provide medical insurance for persons above 65 years of age. Thus, the income-tax benefit for senior citizens will now be only Rs 7,500 per annum, while it was Rs 20,000 up to the year 2005-06. Obviously, there is no justification for such reductions especially as such persons deserve more care.

The rationale

Tax benefit for senior citizens was thought of because of increased expenses on account of health and for meeting unfinished family responsibilities. Many of them are uncared for by their children. Hence, they need more disposable funds than the general category of taxpayers.

Recognising these problems, the Government has mooted the reverse mortgage loan scheme so that they can derive extra money needed by mortgaging their houses while still living in them.

In such a situation, bringing down tax benefits for such persons, more so when there is no unified and comprehensive social security scheme in the country, is clearly unfair.

T. N. Pandey
(The author is a former Chairman of CBDT.)
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