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Journalism of Courage
Cynthia Desouza, 76-year-old widowed pensioner, lives a retired life off her pension and that of her late husband. She is upset because she has to deal with “the bombshell that has hit us senior citizens by the budget of 2005,” after battling falling interest rates and higher levels of risk in investments over the past few years.
What is this bombshell that makes a senior citizen cry? At first brush, the Budget seemed to bring good news across all income categories and age situation — the tax threshold levels were higher, the deduction was higher and the restrictive Rs 5 lakh income ceiling to get rebates was gone.
Also gone were all the rebates and in its place was a Rs 1 lakh deduction from total income.
But while this works very well for a householder with insurances and investments to buy, PF to contribute and a home to buy, it may not work equally well for a retired person. Here’s how:
The old tax structure allowed Rs 30,000 of standard deduction from total income, another Rs 15,000 under Section 80L on bank deposit interest and government securities and another Rs 20,000 would get knocked out of the tax due on account of the Section 88 rebate to senior citizens. This, says Satya Pal Gupta, Secretary Shiv Sena Parliamentary Party, gave the senior citizens a zero tax income up to Rs 1.95 lakh.
The proposed income tax allows a deduction of Rs 1 lakh if this amount is invested in Section 88 products like PPF, NSCs, life insurance premium or ELSS mutual funds. The deduction is also allowed for the provident fund contributions, school fees paid and against the principal paid on a home loan.
This, says Desouza, does not give a level playing field to a retired person “since I have no life insurance, no children to educate, house loan or dependent handicapped person to look after, and have health insurance paid for in a lump sum, all these deductions are not available to me”.
The only option for such a person is to invest this amount in PPF, NSCs or mutual fund ELSS. But, says Desouza: “Investing Rs 1 lakh out of an income of Rs 2.5 lakh is not always possible without drastically lowering my standard of living”.
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Taxing Thoughts
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It is this lowering of a living standard in the sunset years that is upsetting the grey-hairs of India. And with good reason.
A senior citizen earning Rs 2 lakh gross income would be paying pay Rs 1,500 as tax today, but will have to pay Rs 10,000 as tax under the new scheme (assuming that the Rs 1 lakh deduction is not availed of). Reason enough to get upset.
Solutions offered include, retaining the Rs 20,000 tax rebate or as A Ramarao of the All India Retired Railway Officers’ Association, Secunderabad suggests, the exemption limit for senior citizens be pegged at Rs 2.5 lakh instead of the proposed Rs 1.5 lakh.
(Some names have been changed)
