The good news is the higher exemption limit

Published on Mon, Feb 11, 2008 at 10:00 | Updated at Sat, Mar 01, 2008 at 15:07 | Source : Moneycontrol.com

Blish This

Find out all about the budget and how it affects your pocket, that too, minus the jargon. Get tips from experts on what you can do now. Also meet people like you and find out what they think about the budget.Here we spoke to Narendra Kumar, a senior citizen.

Name: Narendra Kumar
Age: 66
Income: Pension Rs 123,600 per annum and Rs 60,000 per annum from other source of income.
Taxable amount: Nil
Investments: Rs 10,000 per annum in mutual funds
Debts: None

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What happened in the budget for him?
The measure: Tax slabs have changed for the better. Here are the new tax slabs for senior citizens:

Slab	Tax rate
0 to Rs 2.25 lakh	0%
Rs 2.25 lakh to Rs 3 lakh	10%
Rs 3 lakh to Rs 5 lakh	20%
Above Rs 5 lakh	30%

However, surcharge and education cess remain the same.
The impact:

Taxable income (Rs)	Tax before budget (Rs)	Tax after budget (Rs)	More money in the pocket (Rs)
200,000	1,030	0	1,030
500,000	88,580	49,875	38,705
1,000,000	243,080	203,424	39,656
1,200,000	335,368	291,746	43,622
1,500,000	437,338	393,716	43,622
2,000,000	607,288	563,667	43,621
2,500,000	777,238	733,617	43,621
4,000,000	1,287,088	1,243,467	43,621

The measure: Senior Citizens Savings Schemes (SCSS) and Postal time deposits schemes included under section 80C.

The impact: If Narendra has invested in Senior Citizens Savings Schemes, the amount will now get him a deduction of up to Rs 1 lakh. He can now also invest in postal time deposit schemes and get a tax deduction of up to Rs 1 lakh.

The measure: Customs duty cut on certain life saving drugs and bulk drugs used in these life saving drugs.

The impact: Some of the medicines for senior citizens and their healtcare will now get cheaper.

The measure: The income from reverse mortgage schemes will not be taxable.

The impact: If Narendra owns a house, he can earn an income from his house while still living in it. He can opt for the reverse mortgage scheme that is offered by several banks and financial institutions. The income from these schemes will not be taxed.

The measure: Section 80D benefits hiked to Rs 15,000 for premium paid for health insurance of parents.

The impact: Narendra's children can now buy health insurance for him and get a tax benefit on that irrespective of whether he is dependent on them or not. This will have a limit of Rs 15,000.

What is his reaction?
“There was nothing done for the healthcare / health insurance for those beyond 70 years of age. At least there has been excise cut on pharma goods but it needs to be seen if the pharmaceutical manufacturing companies pass on the benefit to consumers. The only good news for citizens has been the increase in exemption limit.”

What should he do now to plan his money better?

- The budget has given a boost to debt instruments. And low risk, fixed income debt instruments are what senior citizens are looking for. Chartered accountant Shailesh Haribhakti says, “Investors will have a serious opportunity to invest in debt instruments.”

- Since Narendra can now get a deduction under section 80C on SCSS, he must now try and use that to his complete advantage. But he must not forget that the interest from these schemes is taxable.

- He can earn tax free income by opting for the reverse mortgage scheme.

Want to know what Narendra had expected from the budget? Read this: Make healthcare cheaper