Union Budget 2021 India: Senior citizens now require greater financial support and handholding than any other age group.
Senior citizens require low-risk investment options, and SCSS is a great option, provided tax relief is extended to it.
Union Budget 2021-22 Expectations for Senior Citizens: The Union Budget is the event during which people expect the government to address their financial difficulties and offer solutions. The year 2020 was a difficult one especially for senior citizens due to Covid-19-related health and economic issues. Many senior citizens were forced to liquidate their savings to meet their expenses in the absence of regular income. Many of them who were not covered under a health insurance scheme had to foot high hospitalisation bills for Covid-19 treatment which proved to be a serious setback for their retirement planning.
Senior citizens now require greater financial support and handholding than any other age group.
So, what are the steps that could be taken for senior citizens in Budget 2021? Here are a few critical suggestions in this regard.
1. Increase in the basic exemption to Rs 5 lakh
The existing basic exemption limit for senior citizens is Rs 3 lakh. It was last revised in 2014. In the last six years, inflation has diminished the value of money significantly; therefore, senior citizens now require more money to meet their financial needs than what they would have required, say, a decade earlier. As such, the government could consider raising their basic exemption limit to Rs 5 lakh to lower their tax outgo.
2. Higher tax deductions for medical expenses
Due to Covid-19, there has been a huge escalation in medical bills for senior citizens. They are at higher risk than any other age group due to several co-morbidity-related issues. Currently, under Section 80D of the I-T Act, senior citizens can claim tax benefits of up to Rs 50,000 against medical expenditure or for premiums paid for availing health insurance cover. Senior citizens usually require frequent medical check-ups that do not require hospitalisation. Therefore, they should be allowed to include both medical expenditure and payment towards health insurance premiums for claiming the tax benefit under Section 80D. The deduction limit also needs to be increased to Rs 75,000.
3. Higher threshold for SCSS
The interest earned through Senior Citizen Savings Scheme investments is currently taxable. The interest rates on fixed income instruments are already very low and the tax on returns further depletes the in-hand benefit. In Budget 2021, the government should make interest income on SCSS completely tax-free. Senior citizens require low-risk investment options, and SCSS is a great option, provided tax relief is extended to it.
4. Easy home loan facility
Many retirees and senior citizen individuals want to purchase their own home by taking a home loan. Banks, however, usually allow a home loan to individuals up to the age of 60 years or for a period until the borrower attains 70 years. It means if your age is 65 years and if you want to take a home loan, the bank will allow you maximum repayment tenure of 5 years. The upper age limit to apply for a home loan should be increased to 70 years, and the maximum term for senior citizen home loan applicants should be increased to 20 years (or when they attain the age of 80 years). It’ll help many senior citizens to own their homes using their retirement savings, repay EMIs instead of paying rent and ensure they lead a dignified post-retirement life.
5. Increasing tax benefit on 80TTB
Senior citizen depositors are allowed a tax deduction of up to Rs 50,000 against interest income from bank/post office deposits under Section 80TTB of the I-T Act. However, the exemption limit is not adequate in the present scenario when senior citizens are already getting a very low interest in bank deposits. They now need a higher tax exemption of up to Rs 1 lakh to put money in the banks to earn a safe monthly interest income.
6. Extending tax exemption benefit on annuity income
Annuity income received by senior citizens is taxed according to the applicable slab rate. Senior citizens prefer to receive more of a commuted pension to avoid tax later. If the uncommuted pension which retirees receive in the form of annuity is made tax-free, it will help them to plan for a regular income in a better way so that they can easily meet their day-to-day expenses in their post-retirement years. So, the government should also consider making uncommuted pension income tax-free for the betterment of senior citizens.