When one retires one wants to lead a peaceful and hassle-free life but more often than not, because of ignorance, most senior citizens do not avail of the various benefits offered to them and unduly undergo unnecessary harassment. According to the data available with the Ministry of Social Justice and Empowerment in India, the number of senior citizens, which was 70.69 million in 2001, is expected to go up to 173.18 million in 2026. The Ministry of Social Justice classifies anyone above 60 as a senior citizen.
However, the simple definition of senior citizens is interpreted differently by different organizations. An insurance company considers a person who is 55 as a senior citizen. However, the income-tax department defines a senior citizen as someone who is 65. This creates problems for senior citizens dependent on deposit interest or pension income. Though most of them retire when they are 58 or 60, they have to wait for five to seven years before they can enjoy the benefits of higher tax concession. There are, however, various organizations such as the Dignity Foundation that specializes in giving justice to the elders who are currently lobbying for a single age cut off for senior citizens.
Being a senior citizen, the first thing that one needs to address is finances. The following is a chronicle of how being a senior citizen can make an impact on your personal finances.
Income-tax: Income-tax is one area where the benefits provided to senior citizens start at Rs 2.25 lakh (the highest bracket). But the qualifying age for this is 65 years. Here, the government not only allows more money for them, but also makes leeway for bigger deductions. Medical insurance is one such example.Senior citizen’s policies are more expensive and the government does consider this. As a result, the deductible amount for senior citizen’s insurance policy is Rs 20,000. This is Rs 5,000 higher than what a younger person would pay. As a senior citizen if you fall in the highest tax bracket, this would still amount to a tax saving of Rs 1,500.
The income-tax department has also kept the basic exemption high. For men, there is no tax on the income of Rs 150,000. But senior citizens are exempted from tax if their income is less than Rs 225,000. This translates into savings of Rs 7,500 in taxes.Even if you compare the exemption limit of women senior citizens with a younger one, the tax benefit works out to Rs 4,500. The basic exemption limit for women is Rs 1, 80,000.But before you qualify as a senior citizen for the purpose of tax, there are other areas where you can take advantage of much earlier.
Bank Deposits:This is an area where the elderly get to earn more on their investments. Banks offer a higher rate of interest on fixed deposits to senior citizens. The offering is 0.5-0.75% more than the prevalent interest rates. The minimum age to get a premium on your deposit is 60.A younger age group person can also enjoy this benefit if he opens a joint account with a senior citizen. But the deposit needs to be in the name of the elder one.Let’s look at the mathematics behind this offering. If an Eighty-seven-year-old Mrs. M. Bafna says that she avails of the additional interest benefit on Fixed Deposits that range from anywhere between 0.25% to 0.50% over and above the ones offered to all those who do not come under the senior citizens’ category.Elderly person invests Rs 50,000 for a 3-year-tenure at an interest rate of 9% as a regular rate and 9.5% for senior citizen, on maturity, the person will get Rs 965 more. If a senior citizen opts for quarterly payout of interest, then he earns Rs 750 more.
Bank Deposits:This is an area where the elderly get to earn more on their investments. Banks offer a higher rate of interest on fixed deposits to senior citizens. The offering is 0.5-0.75% more than the prevalent interest rates. The minimum age to get a premium on your deposit is 60.A younger age group person can also enjoy this benefit if he opens a joint account with a senior citizen. But the deposit needs to be in the name of the elder one.Let’s look at the mathematics behind this offering. If an Eighty-seven-year-old Mrs. M. Bafna says that she avails of the additional interest benefit on Fixed Deposits that range from anywhere between 0.25% to 0.50% over and above the ones offered to all those who do not come under the senior citizens’ category.Elderly person invests Rs 50,000 for a 3-year-tenure at an interest rate of 9% as a regular rate and 9.5% for senior citizen, on maturity, the person will get Rs 965 more. If a senior citizen opts for quarterly payout of interest, then he earns Rs 750 more.
Government employees (Central as well as State) get some relaxation on retirement if they open a deposit with nationalized banks. Public sector banks give interest at par with senior citizens, if government employees invest the money received from the employer within three months of getting the cheque.
Senior Citizen Savings Scheme: The annualized interest rate in the Senior Citizens Savings Scheme (SCSS) is 9%. The entry age for this scheme is the same as the one required for Fixed Deposit, that is, 60. But the government has given some leeway for retirees. A person who is retiring and has crossed 55 years of age is allowed to invest in this scheme, if the money is invested within a month of receiving the amount from the employer. The tenure of this deposit is five years.
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