New Delhi: One aspect of budget 2005 that had a substantial impact on senior citizens was the removal of the benefit available under section 80L. Interest income, which was earlier exempt under that section, was brought into the tax net.
Since retired people from the private sector have only their own savings and no pension, they have to rely only on the interest amount for their day-to-day expenses.
Premen Maitra, retired official from a financial firm, residing in Lucknow says, "As there was an overall rise in prices, it adversely affected senior citizens. For example fuel prices went up. Moreover, interest rates also fell which reduced the interest income that we received. In 1997-98 post office interest rate was 13 per cent but by 2005-06 it gradually declined to 8 per cent. Moreover, taxing this interest reduced our net income."
Tax experts appear to echo this concern. Says financial advisor Sanjay Matai, "With the removal of section 80L, even Re. 1 of interest income becomes taxable. Additionally, tedious TDS provisions became applicable. This has made the matter cumbersome, especially for small amounts of interest earned without any significant benefit to the exchequer. Hence this section should be reintroduced."
Mrs Thomas, wife of a retired army official complains that due to the introduction of Value Added Tax (VAT), prices of FMCG products that she bought from the military canteen rose. She adds, "We got no benefits from the last year’s budget and due to this our savings have decreased."
Clearly, apart from falling interest income, the main concern for this section of society is rising prices. Both Maitra and Thomas are concerned about the increase in fuel prices and want it to go down. Thomas says, "Our expenses on LPG have increased by Rs.50 per month which has made the household budget unbalanced."
On the savings aspect, Maitra is worried about the recent announcement with respect to the Post Office's Monthly Income Scheme (MIS). He says, "There was 10 per cent bonus given for these schemes but since last Monday this provision has been curtailed."
That change brings down effective returns substantially. Tax expert Sandeep Shanbhag puts a number to it, "The MIS ruled the roost as far as fixed income investments were concerned. With 8 per cent p.a. payable monthly and a 10% bonus at maturity, the effective return or IRR worked out to 9.67 per cent p.a. However, w.e.f. 13.2.2006, the 10 per cent bonus has been cancelled, effectively bringing the return down to 8.3 per cent p.a."
Apart from that, Maitra feels that banks are unfair when it comes to giving out loans to senior citizens. He says, "Banks want a salary backing for repayment of the loan, and this makes it difficult for us to avail of any loans."
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