BackSeniors want deposit security, more tax benefit
Retirees hope the budget increases the insurance limit for bank deposits, have products that give inflation-beating returns and better banking services
PremiumTwo of the biggest worries that senior citizens have is the failure of banks in the recent past and the rising cost of medical treatment in the country, and they hope finance minister Nirmala Sitharaman will address these concerns in the upcoming budget.
Securing deposits
Fixed deposits (FDs) are one of the common tools that senior citizens use for parking their savings and receiving regular income. Most retirees keep their money in fixed deposits for the predictability and safety of returns. But in the wake of recent scams such as the one at the Punjab and Maharashtra Co-operative (PMC) Bank, FDs do not inspire the same confidence among seniors as they did earlier.
The Reserve Bank of India’s (RBI) Deposit Insurance and Credit Guarantee Corp. (DICGC) insures deposits up to ₹1 lakh if a bank fails. However, seniors feel this is not enough. Following the PMC bank scam in November last year, many people reportedly died due to stress caused by the fear of losing their life savings. The PMC Bank case was not a lone one. RBI has restricted withdrawal from about four co-operative banks since the PMC Bank fraud came to light. While at present, the problem is largely with co-operative banks, an increase in insurance would give comfort to depositors, especially senior citizens.
“Scams and failure of banks may not be completely avoidable. But the government should hike the limit of insurance on deposits. Preferably, the insured amount should be about ₹15-20 lakh. Seniors can accordingly spread their risks across different banks," said Manoharmal Bhandari, a Bengaluru-based retired businessman. The 69-year old high net-worth individual (HNI) now works for social causes, and is a treasurer with Bhagwan Mahaveer Jain Hospital.
Increasing tax benefits
Another relief that seniors seek is higher tax deduction for medical expenses, which typically go up as one grows older. At present, the government provides tax deductions on the premium paid for health insurance (under Section 80D of the Income-tax Act), medical check-up (Section 80D), specified diseases (Section 80DDB) and disabilities (Section 80DD). But seniors feel these are not enough. “The deduction should be higher and disease agnostic. Genuine medical expenses for any ailment should be eligible for deduction. The deductions available at present have not kept pace with the rising medical inflation," said Suryakant Lakhotia, a Mumbai-based retired businessman. According to the 66-year-old, the government should also allow tax deductions to close relatives if they pay for any medical expenses of seniors, instead of giving benefits only in the case of specified diseases. “The government healthcare programmes are not up to the mark. Instead of revamping the existing healthcare infrastructure, the government can provide better tax deduction that can go a long way," said Lakhotia.
Bhandari would like the government to overhaul the income tax structure. “In the long run, if the government can implement a tax on transactions, the collection would be far higher than the revenues the government makes through income tax collection," he said. He thinks that if there’s no income tax, individuals won’t mind paying 0.75-2% tax on transactions.
Better products
Rising inflation is one of the most significant risks that retirees face as it can eat into their savings substantially. The government can look at investment instruments that help seniors to tackle this issue. “The government can re-introduce inflation-linked bonds with a meaningful spread over the average annual inflation rate," said Premnath Kohli, a Delhi-based retired government servant.
RBI had introduced inflation-linked bonds earlier but they were not as successful as expected. The bonds had a coupon rate of about 1.50%—they gave the investor a return that was about 1.50% higher than inflation.
“The spread was not attractive. If inflation is 4.50-5%, the returns are about 6-6.50%. This is lower than other options that seniors already have at their disposal," said the 71-year-old retiree. A senior can get 8.60% interest on Senior Citizens Savings Scheme (SCSS), up to 8.30% in Pradhan Mantri Vaya Vandana Yojana (PMVVY), 7.75% in RBI’s savings bonds and 7.70% in five-year post office FDs. Kohli also wanted the finance minister to extend PMVVY but with interest rates similar to what SCSS gives.
Better banking services
Some seniors also wish for better services from the government. While RBI has said that seniors can get banking services at home, many complain that some branches of public sector banks don’t follow it. “The government should set up a separate grievance redressal body in banking for senior citizens. Not only PSBs create problems in providing banking services at home, but the service in their branch is also poor. The complaints through regular channels hardly yield results," said Kohli. A separate body that takes up seniors’ grievances should help, he added.
A higher tax deduction may be a tough ask, but increasing the limit of deposit insurance is indeed the need of the hour. Also, improving banking services is important.
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