Except for senior citizens, the Union budget has very few major initiatives on the personal taxation front. The Direct Tax Code (DTC), which aims to revamp the existing direct tax structure, will come into effect on April 1, 2012. In a limited way, the budget proposals aim at bringing about a transition to the DTC. The exemption limit for the general category of taxpayers has been raised from Rs.1,60,000 to Rs.1,80,000, providing a relief of a little over Rs.2,000. But by far the most significant initiative has little to do with tax rates or slabs. It is an administrative decision to reduce the qualifying age for senior citizens from 65 years to 60. With the exemption limit raised to Rs.2,50,000 from Rs.2,40,000, this new segment of senior citizens will get over Rs.9,200 as relief. The Finance Minister has also created a new category of ‘Very Senior Citizens', 80 years and above, who will qualify for a higher exemption limit of Rs.5,00,000. This category can save on taxes up to Rs.26,780.
The tax saving for senior citizens may look significant. For many, however, it will be illusory. For one thing, one must have an income stream that is large enough to qualify for savings. Not many in the salaried class are likely to have a taxable income of more than Rs.2,50,000, after retirement. It is even less likely that there will be many taxpayers in the 80-plus age group with an annual income of Rs.5,00,000. Even more contrived is the logic that senior citizens can plan their taxes better by investing in tax-saving instruments up to Rs.1,20,000. Such instruments are essentially long-dated and even if senior citizens have enough income they would be ill-advised to lock their money in these. The Finance Minister is absolutely right when he says that senior citizens deserve special attention. Today's senior citizens depend on limited fixed incomes and did not have many opportunities to save and plan for their retirement during their working years. For instance, access to home loans and life insurance was minimal until not too long ago. That has made them extremely vulnerable after retirement. Government support to them ought to go well beyond tax reliefs and address the concerns of the aged in a holistic manner.
