Monday, February 28, 2011

Senior Citizens and Budget 2011

If age is just a number, this round number has a large smiley on it. The Budget has some sweet treats for senior citizens, especially those over 80 years old.
One, the exemption limit for seniors has been increased by Rs 10,000 (from Rs 2,40,000 to Rs 2,50,000).
Two, a new category — very senior citizens who are 80 and above — has been created. For this group, the exemption limit has been lifted all the way up to Rs 5,00,000. That's twice the amount of the regular senior-citizen cutoff. The tax rate on income between Rs 5,00,001 and Rs 8,00,000 and Rs 8,00,001 and above will remain at 20% and 30% respectively.
Three, Mukherjee has also brought down the threshold age for senior citizen from 65 to 60 years.
According to revenue secretary Sunil Mitra, the number of taxpayers over 80 is only about 5,000. So Mukherjee's graceful gesture seems more like a tokenism. But with Indians living longer, the numbers are bound to plump up. This new category of taxpayers will save Rs 26,780 on an income of Rs 5,00,000 as tax after paying 2% education cess and 1% higher education cess.
Lowering the threshold age for senior citizen from 65 to 60 years means that taxpayers in the age group of 60 to 65 who were treated as general taxpayers in the existing regime will now be treated as senior citizens. This will benefit them by Rs 9,270 per annum if they have an income of Rs 2,50,000.
The new tax proposals for the elderly are an effort to align tax rates with the rates proposed in Direct Tax Code (DTC), which is likely to be implemented from 2012. The DTC proposes that the exemption limit for senior citizens be raised to Rs 2,50,000. Mukherjee has done so with his new Budget and has gained a year.
The introduction of an 80-plus category is a goodwill gesture to the grey brigade. However, a senior tax consultant says that in the present circumstances, when inflation is in double digits, increase in the exemption limit does not amount to much in real terms. He pointed out that the finance minister had increased the service tax on airconditioned hospitals with 25 beds, and this would increase the burden on senior citizens who require the maximum medical care.

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