Age wise, but not exemption-wise

INCOME TAX: Category of 'very-senior citizens' introduced, no hike in limit for women

Senior citizens should be a happy lot after the Budget. After meeting their long-standing demand of making 60 as the defining age of senior citizens, the finance minister has also introduced a special category — ‘very-senior’ — for citizens over the age of 80, perhaps in tune with the rising life expectancy. The basic exemption limit for this new category will be Rs 5 lakh, double than that for senior citizens.

Earlier, while the retirement age of a person was 60, the tax benefits came only at the age of 65.

But the good news ends there. The other categories of taxpayers will not feel too happy with the finance minister. The increase in the basic exemption limit by just Rs 20,000 for individuals — from Rs 1.6 lakh to Rs 1.8 lakh — is hardly substantial. This translates into a saving of just Rs 2,060 across income groups. Similarly, the increase in the exemption for senior citizens — from Rs 2.4 to Rs 2.5 lakh — is even smaller, at just Rs 10,000. The net tax benefit is only Rs 1,030. The exemption for women has not been changed and remains at Rs 1.9 lakh.

“On the personal tax front, the finance minister has only taken a step towards the Direct Taxes Code regime. Clearly, an extra exemption of Rs 20,000 (Rs 2,000 less tax liability) isn't such a big relief for those in the higher tax bracket. We had expected the basic exemption limit to move up to Rs 2 lakh for all,” said Kaushik Mukherjee, Executive Director, PricewaterhouseCoopers.

Mukherjee felt that the bigger disappointment was no change in exemption limit under Section 80C. There was an expectation of an extra exemption of Rs 50,000, excluding the exemption under infrastructure bonds.

Very-senior citizens with a taxable income of Rs 3 lakh stand to benefit. Between incomes of Rs 3 lakh and Rs 50 lakh, the benefit is between Rs 6,180 and Rs 26,780. This is over and above the benefit they would get as senior citizens.
 

BONANZA FOR SENIOR CITIZENS
Income (Rs)	Male TAXPAYER			Senior citizen (60-79)			SENIOR CITIZEN (80 and above)
	Existing  tax	Proposed  tax	savings  tax	Existing   tax	Proposed    tax	savings  tax	Existing   tax	Proposed    tax	savings  tax
1,00,000	Nil	Nil	Nil	Nil	Nil	Nil	Nil	Nil	Nil
2,00,000	4,120	2,060	2,060	Nil	Nil	Nil	Nil	Nil	Nil
3,00,000	14,420	12,360	2,060	6,180	5,150	1,030	6,180	Nil	6,180
5,00,000	35,020	32,960	2,060	26,780	25,750	1,030	26,780	0	26,780
7,00,000	76,220	74,160	2,060	67,980	66,950	1,030	67,980	41,200	26,780
10,00,000	1,58,620	1,56,560	2,060	1,50,380	1,49,350	1,030	1,50,380	1,23,600	26,780
15,00,000	3,13,120	3,11,060	2,060	3,04,880	3,03,850	1,030	3,04,880	2,78,100	26,780
20,00,000	4,67,620	4,65,560	2,060	4,59,380	4,58,350	1,030	4,59,380	4,32,600	26,780
25,00,000	6,22,120	6,20,060	2,060	6,13,880	6,12,850	1,030	6,13,880	5,87,100	26,780
50,00,000	13,94,620	13,92,560	2,060	13,86,380	13,85,350	1,030	13,86,380	13,59,600	26,780
Note: There is no change in the tax structure of female taxpayers who are not senior citizens Taxpayers between 60 and 65 will benefit further as they will be considered senior citizens for FY12 vs normal taxpayers in FY11

Besides these exemptions, the Union Budget has continued with the benefit of Rs 20,000 for infrastructure bonds under Section 80 CCF.

Amitabh Singh, partner, Ernst & Young, feels the FM has been moderate with his personal tax numbers because of inflationary pressures. “Individuals should be happy that there was no harsh measure taken in the inflationary environment,” he said.