Krishna Narayan Argulkar may be 84 but that has not stopped him from living it up, be it the community get-togethers in his housing society or an outing with friends. With a kitchen well stocked with milk, honey and nuts and his morning exercise regime well mapped out along the tree-lined avenues of Pune, Argulkar is determined to live fully. Around 160-km away in south Mumbai, Octi-Gen Pheroze Bhathena prefers to spend his time between books and news channels in his home. Though distanced by many likes and dislikes, they both have one thing in common. They belong to part of a new tax entity that the finance minister has defined. They are the Octi-Gens—or the 80-plus people who now have a tax category all to themselves.
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What has changed
Earlier, men and women over 65 years of age were classified as senior citizens with the tax exemption limit set at Rs2.40 lakh. Post-budget, the finance minister created a new category of very senior citizens for those who are above 80 years of age and increased the exemption limit for them to Rs5 lakh. For this fiscal year, Bhathena will pay a tax of Rs14,000 as he falls in the 10% tax category. But in 2011-12, income remaining the same, he will move to a zero-tax status because of the new category. Senior citizens such as Bhathena who have an annual income of less than Rs5 lakh will now pay no taxes. “Assuming you had no tax saving investments, you can now save anything up to Rs25,000 a year if you fall in this tax bracket,” says Uday Dhoot, deputy CEO, International Money Matters Pvt. Ltd, a Bangalore-based financial planning firm.
Pheroze Bhathena, Age: 82 years, Benefited from the new tax slab: Yes, saves 10% of his taxable income; Photo Hemant Mishra/Mint
Benefit for how many?
But the larger question is, how many people will benefit from this tax twist? Says Parizad Sirwala, executive director-tax, KPMG, “It is difficult to find old people, let alone tax-paying people who are so old. There are also no statistics or details available to find out how many people are actually there in this category, how many of them will benefit from this and in what way.”
KRISHNA NARAYAN ARGULKAR, Age: 84 years, Benefited from the new tax slab: Yes, doesn’t have to lock money in tax-saving schemes any more; Photo Sandesh Bhandare/Mint
Adds Gautam Nayak, a Mumbai-based chartered accountant, “According to a report I read post budget, there are just 5,000 taxpayers in India who are above 80 years of age. So really this move is going to benefit very few people, probably someone who continued working post retirement and worked till recently or very senior civil servants.” Confirms the All India Central Government Pensioners’ Association that while the pension for central government retirees’ ranges between Rs3,500 and Rs40,000 per month, those at the higher end of the spectrum are very few. Similarly, according to an October 2010 report by HelpAge India, about 72% of the above-80 population in India is financially dependent. While most old people live with their children today, the scenario may change in the coming years making the tax exemption a welcome change. Says, Mathew Cherian, CEO, HelpAge India, “Demographically if you look at our country, the population between 80 and 90 is going to increase, and unlike those who are already in their 80s, the coming generations no longer live with their children. So it is indeed a welcome move.” Given the increasing medical costs that they will have to bear on their own and the decreasing dependency factor, the senior citizens have more reason to smile than the very senior citizens.
The real beneficiary
The people who have really benefited are those between 60 and 65 years of age. They would have had to wait to get the higher tax exemption, but now will reach it five years earlier. Men touching 60 years of age, can now save up to Rs9,270 in taxes. Women, who are already at a higher exemption limit than men, will benefit by Rs6,180.
Kayezad E. Adajania constributed to this story.