It is rather unfortunate that the Direct Taxes Code proposes to curtail the tax benefits for senior citizens. The status of ‘senior citizen’ for income-tax purposes was first recognised by Dr Manmohan Singh, as Finance Minister in his 1992-93 Budget speech, taking into account the various difficulties (including financial) the aged face.
Relief by way of reduction in tax liability was first given by deduction of certain lump-sums from the total income and later by way of tax credit (rebate). Considering the rising cost of living, the amounts were increased from time-to-time. For two assessment years (AYs) 2004-05 and 2005-06, the maximum amount of tax reduction was Rs 10,000 in a year. However, Mr P. Chidambaram, as Finance Minister, changed the system by giving higher exemption limits for senior citizens, the amount of tax reduction vis-à-vis general taxpayers started getting reduced. At present, it is Rs 8,000; it was lower in the intervening years. The DTC proposes to reduce it to Rs 5,000 – a reduction of Rs 3,000 in a year – because the exemption limits are proposed at Rs 2 lakh and Rs 2.5 lakh, respectively, for general taxpayers and senior citizens.
But this hardly seems justified considering that the cost of living has been rising steeply. Larger outgo by way of income-tax will reduce the available surpluses.
Senior citizens are likely to be hit in other ways too. At present, senior taxpayers have the freedom to investment in varied ways under Section 80C of the I-T Act – ELSS, ULIPs, mutual funds, fixed deposits in banks for five years, etc.
This freedom is proposed to be curtailed, ignoring the fact that the aged like to invest in hassle-free modes and for lesser lock-in-periods. There will be no such choice under the DTC. Investments will have to be made only in government-controlled funds/pension funds, etc., if benefit equivalent to Section 80C is to be enjoyed.
In the absence of an organised social security system in the country, senior citizens certainly deserve a better and more equitable deal from the Finance Ministry.
