The National Housing Bank (NHB) will press for tax exemption for annuities provided to senior citizens under the recently-launched Reverse Mortgage Loan Enabled Annuity scheme (RMLEA), NHB chairman and chairman of Central Bank of India S. Sridhar said on Monday.
Addressing a workshop on the new scheme hosted by the Consumers Association of India (CAI), Mr. Sridhar said that the NHB would route its request through the Central Board of Direct Taxes and seek exemption for RMLEA accruals for senior citizens in the Union Budget for the next fiscal. Though the RMLEA is a substantially improved product compared to its predecessor the Reverse Mortgage Loan, the annuities are now treated as salaries and taxed accordingly.
The NHB which had launched the RML scheme with basic features in 2007 had gone back to the drawing board with a slew of suggestions from senior citizens and launched an improved version that offered higher security for the elderly in 2009.
“We would like senior citizens enrolling for the scheme to provide feedback on features they would like and the NHB could review what could be done,” Mr. Sridhar said.
While Central Bank of India is the sole bank offering the RMLEA after tying up with Star Union Dai-ichi Life Insurance, 22 other banks are offering the earlier reverse mortgage scheme. The NHB chairman sought more banks to roll out the new scheme after identifying insurer partners.
The RMLEA is unique because it is the world's first ever market-led scheme of its kind unlike in other countries where such schemes are Government-administered, Mr. Sridhar said.
Chief Secretary K.S. Sripathi said social changes had resulted in a large number of elderly couples with no one to depend on. Most of them have their children working abroad and had to lead their lives without physical, financial or emotional support, he said. P.R. Jaishankar, AGM, NHB, said the annuity product was conceived to offer security to the elderly who constituted 7 per cent of the population in India — about 7.7 crore. The new scheme, where senior citizens mortgaged their property with a bank, offered almost twice as much returns as annuity than the monthly/quarterly accruals under the previous scheme. It also provided a continuum of annuity cover lifelong whereas the original reverse mortgage scheme also had a time limit of 15 years, extendable to a maximum of five years.
R. Desikan, CAI Trustee, said the organisation which had provided inputs for calibrating the mortgage enabled annuity scheme would press for a better regulated Consumer Protection Act in the country.
