March 1, 2011

INDIA: Old is bold in tax sop

KOLKATA, March 1, 2011 / The Telegraph / Front Page Story / March 1, 2011

By Srikumar Bondyopadhyay

Taxpayers aged 80 or above are among those who stand to gain the most from the budget, though no special relief has been announced for women.

Finance Minister Pranab Mukherjee rectified a long-standing anomaly between the definition of “senior citizen” in general and that for income tax purposes. The cut-off age for tax relief has now been brought down to 60 from 65, although Railways Minister Mamata Banerjee has gone one up by giving senior citizen status to women who are 58 and older.

The higher income tax exemption limit of Rs 250,000 will apply to those who have attained the age of 60 years anytime before March 31, 2012, for the assessment year 2012-13.

So far, individuals aged between 60 and 65 years were considered general category taxpayers and could avail themselves of the basic exemption limit corresponding to the respective gender category.

For example, the basic exemption limit for a 62-year-old man was Rs 160,000, and a woman of the same age would have had to pay income tax if her annual income was in excess of Rs 190,000. In contrast, the basic exemption limit for senior citizens was Rs 240,000.

Now both the individuals in the earlier example will be eligible for basic exemption of Rs 250,000 for the financial year 2011-12.

Mukherjee has proposed a new category of individual income-tax payers ahead of the implementation of the direct tax code from April 2012.

Those who are 80 years or above will have to pay income tax only if their annual income is more than Rs 500,000.

There aren’t too many taxpaying 80-year-olds — one estimate put the number at 15,000.

Following the relief, both men and women in the 80-plus age category can save up to Rs 26,780 a year in tax. Men in the age group of 60 and 65 years will be the second-highest beneficiaries and could save Rs 9,270 annually.

Women in the same age group, however, will save less (Rs 6,180) because the basic exemption limit for general category women was higher at Rs 190,000 than for men at Rs 160,000.

While the basic exemption limit for women has been kept unchanged at Rs 190,000, the finance minister has increased it for men by Rs 20,000 to Rs 180,000 — a 12.5 per cent rise against the annual food price inflation of 11.49 per cent.

An octogenarian taxpayer with an annual income of Rs 500,000 can now save nearly Rs 2,232 a month, but the tax savings for a person aged between 65 and 80 years will be a paltry Rs 86 after an increase in the basic exemption limit to Rs 250,000 from Rs 240,000.

Copyright © 2011 The Telegraph.