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Slug:
Money Matters : BCAS Feature
Pages: 22/23
Title: Has the Budget
Done Justice to the Seniors?
Words: 1337 |
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We requested for the threshold
exemption of Senior Citizens (SZ) to be raised
from Rs 1.85 lakhs to Rs 3 lakhs. It is enhanced
by only Rs 10,000 i.e. threshold is now Rs 1,95,000.
That gives a relief of only Rs 2,000 per year.
Even that amount is really not saved as against
such relief, an additional cess called "Secondary
and Higher Education Cess" is levied at
1% of the tax and surcharge, if any. The following
table gives the tax position for the years ending
March 31, 2007 and March 31, 2008 :
|
Total
Income |
tax+
sc +
education cess |
tax
+ sc + two
education cess |
gain/loss |
Rupees |
y.e.
31.3.2007
Rupees |
y.e.
31.3.2008
Rupees |
Rupees |
1,85,000
|
---
|
---
|
---
|
1,95,000
|
2,040
|
---
|
2,040
|
2,50,000
|
13,260
|
11,330
|
1,930
|
3,00,000
|
28,560
|
26,780
|
1,780
|
4,20,000
|
65,280
|
63,860
|
1,420
|
6,00,000
|
1,20,360
|
1,19,480
|
880
|
7,50,000
|
1,66,260
|
1,65,830
|
430
|
10,00,000
|
2,42,760
|
2,43,080
|
(
- ) 320 |
11,00,000
|
3,00,696
|
3,01,378
|
(
- ) 682 |
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| Notes : |
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| Rates of tax for Resident
Individuals of 65 years and above
|
y.e. 31.3.2007
|
y.e. 31.3.2008
|
Tax |
Upto Rs. 1,85,000 - NIL
> Rs.1,85,000 to
Rs.2,50,000 - 20%
> Rs.250,000 - 30% |
Upto Rs.1,95,000 - NIL
> Rs.195,000 to
Rs.250,000 - 20%
> Rs.250,000 - 30%
|
Surcharge only when
total income exceeds Rs.10,00,000
|
10%
|
10%
|
Education cess on income-tax plus Surcharge,
if any
|
• to provide
and finance universalised quality basic
education
|
@ 2%
|
@ 2%
|
• to provide
and finance secondary & higher education
|
--
|
@ 1% |
|
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| |
We had expected the deduction
u/s.80D for medical insurance premium to be
increased for Seniors from Rs 15,000 to atleast
Rs 30,000. Our justification for a limit of
Rs 30,000 was based on the fact that Rs 15,000
was inserted with effect from April 1, 2000
and after 7 years the cost of mediclaim premiums
have gone up. It is now proposed to increase
it only to Rs 20,000. Thus, if any Senior insures
himself under Mediclaim policy in the year ending
March 31, 2008 or the premium is paid to effect
or to keep in force an insurance on the health
of the Senior by any of his/her children, deduction
allowed will be upto Rs 20,000. The cost of
medical services is rising phenomenally, specially
the hospitalisation cost. In spite of mediclaim
insurance schemes, senior citizens (sometimes
they're even refused medical insurance) have
to incur heavy medical costs. The Finance Minister
should have provided for a deduction of expenditure
incurred on medical treatment (including cost
of medicine) for self and spouse upto Rs 50,
000.
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The most objectionable
proposal specially affecting Senior Citizens
in this budget is the deduction of tax on the
interest payable on 8% savings (Taxable) Bonds,
2003, exceeding Rs 10,000 during a financial
year. Tax will be deducted at 10.3% of the interest.
The provisions of the existing section 193 exclude,
inter alia, any interest payable on any security
of the Central Government or a State Government
from the requirement of deduction of tax at
source. Consequently, tax is not being deducted
on interest payable on 8% Savings (Taxable)
Bonds, 2003. The 8% Savings (Taxable) Bonds,
2003 are Central Government Securities.
|
These Bonds were notified
vide Notification dated 21.3.2003. Para 14 of
the Notification provided for tax deduction
at source. However, subsequently the said para
was deleted vide circular No.RBI/2004/13 issued
by RBI to various banks etc. which read as under:
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"Please refer to our letter
No.CO.DT.13.01.299/H-38362002-03 dated 3 rd
April 2003 on the captioned subject. In this
connection, we advise that Government of India
has since notified that para 14 of the Ministry
of Finance's Notification No.F4 (10)-W&M/2003
dated 21 st March 2003 has been deleted vide
their Notification No.F4(10)-W&M/2003 dated
13 th January 2004 . Accordingly, we advise
that no tax should be deducted at source while
making payment of interest on the captioned
bonds".
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The Senior Citizen now
suffers as his investment in such bonds is blocked
for 6 years from the date of issue at the interest
rate of 8% p.a. even though the rate on fixed
deposits with various reputed scheduled Banks
is presently higher upto 10% for a period of
even less than 6 years. And now the Seniors
will suffer more with the tax deduction and
all the harassment accompanying such provisions.
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The issue is, how can the
Government go back on such provision retroactively?
When any person subscribed to these bonds, the
condition agreed by the Government was that
no tax shall be deducted at source. Now the
Government wants to breach this condition. Is
it fair ethically? Is it legally permissible?
Dignity Foundation should strongly object to
this amendment. Government can provide for TDS
on Bonds being subscribed from March 1, 2007
, but should not deduct tax on interest on bonds
issued till February 28, 2007 .
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It may
be noted that the SZ can furnish a declaration
in Form 15H for no deduction of tax only if tax
on his estimated total income will be 'nil' and
not otherwise. Thus, all Seniors whose total income
is above Rs 1,95,000 cannot furnish form 15H and
will have to approach the assessing officer to
get certificate of deduction at a lower rate.
To take some examples: |
|
|
Total Income |
Tax |
TDS |
| Total income of SZ is
only from 8% savings
(Taxable bonds:of Rs 25 lakhs) |
Rupees
2,00,000 |
Rupees
1,030 |
Rupees
20,600 |
of Rs 30 lakhs
|
2,40,000 |
9,270 |
24,720 |
of Rs 40 lakhs
|
3,20,000 |
32,960 |
32,960 |
|
|
| |
In the
above examples, Senior Citizens may have other
exempt income such as mutual fund units, dividend
etc. |
Another
unfair proposal affecting Senior Citizens is increasing
DDT (Dividend Distribution Tax) on dividends by
companies from 12.5% to 15% (effectively from
14.025% to 16.995%). Similarly, DDT on income
distribution of Mutual Funds on a money market
mutual fund or a liquid fund which presently is
at 12.5% for individuals is being increased to
25% i.e. doubled (effective rate from 14.025%
to 28.325%). This is harsh for Senior Citizens.
Assume that the income of one SZ is only from
units-income from money market mutual funds and
based on the rate of dividend declared by MF,
it works out to Rs 2,00,000. (MF first computes
amount entitled by him of such sum before DDT).
On such sum, presently MF would deduct Rs 28,050
i.e. at 14.025% of Rs 2,00,000 and pay Rs 1,71,950.
With effect from April 1, 2007 it will deduct
Rs 56,650 (i.e. at 28.325% of Rs 2, 00,000) and
pay Rs 1,43,350, less by Rs 28,600. Even the deduction
of Rs 28,050 was unjustified when the SZ's effective
tax rate was only Rs 3,060. Same w.e.f. April
1, 2007 is Rs 1,030 while actually Rs 56,650 is
taken away from his income. |
Something has to be done.
The Finance Minister justifies many levies on
the principle of horizontal or vertical equity.
May we ask on what norms he justifies such ill-treatment
of small income earners? Isn't it against all
equities?
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