Senior Citizens in India face a number of challenges today. Apart from deteriorating health, non-productivity, isolation and boredom, worrying about finances tops their list. Unlike parents in developed nations like the United States, parents in India have their children live with them for a much longer time and completely finance their education and wedding expenses. It is perceived as a duty of the parent in the Indian social set-up. Financially independent Senior citizens face far lesser issues than the dependent ones.
At 60, the salaried working class go through major changes in their roles, responsibilities and financial status. They see their children become independent or separate from them because of marriage or employment and have no idea of the things that would become a part of their daily routine. Their savings and the assets will now enable them to lead a financially independent life. There is also a compelling need to have a proper understanding about the reduction in their earning capacity.
Income Tax policies for Senior Citizens in India are favorable. Knowing how to manage income and learning more about how to leverage on assets can have them enjoy a comfortable and peaceful life. Consulting a financial advisor is definitely a wise action and can give senior citizens a lot of clarity on their current financial position.
Let us see how a tax exemption coupled with the right understanding about using assets brings a solution to the financial woes of a Senior Citizen Mr. Siddiaiah:
Saying it wisely with Mr. Siddaiah’s story
Mr. I. Siddaiah is a retired university professor. His 35 year long tenure at the Bangalore University as a professor in Quantum Physics, came to an end on the 13th of July 2016. He lives with his wife at the staff quarters provided by the University. Mr. Siddaiah has one daughter whom he married off to a software engineer. His daughter now lives in New Jersey with her husband and a 3 year old son.
He also owns an independent house near Tumkur Road Dasarahalli. Mr. Siddaiah believes in simple living. He had planned to get his daughter married at least 4-5 years before his retirement which he managed to do. He always wanted to retire to his small home which was situated a little away from the city. When Mr. Siddaiah purchased the land and built a home 25 years ago, little did he know that the place would also develop and become so much like the localities in the city.
He received a handsome amount as his PF and gratuity and decided to give his home a make-over. Time and again Mr. Siddaiah worried about medical expenses, as both Siddaiah and his wife are diabetic. He also wanted to make a trip or two to the US to see his daughter and grandson. He knew that his daughter would not want to come back to India or at the least be interested in staying with him.
He was looking for an alternate source of income as he feared rising medical and living expenses may have him compromise on his lifestyle sooner or later. He consulted a financial advisor who told him to go opt for a reverse mortgage on his home.
What is a reverse mortgage?
A reverse mortgage is the exact opposite of a home loan. Here the bank pays the mortgagee, in this case Mr. Siddaiah, a monthly amount like that of an EMI for a tenure of say 15 or 20 years, and in some cases for the rest of the lifetime of the mortgagee. The bank would sell the property after the death of the mortgagee and realize the money loaned. The surplus of the proceeds from the sale would be paid to the legal heirs of the mortgagee. Mr. Siddiaiah can continue to stay in his home for the entire mortgage period. He can now leaf a comfortable life with the income from his pension and the monthly payment on the mortgage.
Other Tax Exemptions for Senior Citizens
Well, the most important part is that Mr. Siddaiah’s income on the reverse mortgage is completely exempt from tax, because he enjoys the status of a Senior Citizen. There are a quite a few good tax policies that ease it out for the Senior Indian Citizen. They receive a host of benefits under Tax Exemptions:
A higher income slab that is exempt from tax: 3 lakhs for Senior Citizens (above 60 years) and 5 lakhs for Super Senior Citizens (above 80 years).
Exemption of medical Insurance premium: The exempt amount of 25,000 for Senior and 30,000 for Super Senior, as compared to 15,000 of non-senior citizens.
Exemption from paying advance tax: A senior citizen with no business income need not pay advance tax, instead pay a self-assessment tax on the total income.
Non-deduction of TDS on interest: A senior citizen does not pay TDS on interest earned from his deposits if he has nil or zero tax to be paid for that financial year.
Higher Deduction under Sec 80DDB: The Senior Citizens are eligible for a deduction of INR 60,000/- of expense on medical treatment for specified ailments as compared to 40,000/- otherwise.
Most importantly, a Senior Citizen can opt for a reverse mortgage scheme and pay NO TAX on the amount received. So if you are heading towards your golden years consult a financial advisor today.
This article has been contributed by Right Horizons