In­cen­tives for se­nior cit­i­zens in Bud­get 2014

Mea­sures by the govern­ment in the fields of health­care, so­cial se­cu­rity and di­rect taxes are likely to ben­e­fit se­nior cit­i­zens

HT Estates - - HTESTATES -

The Govern­ment un­veiled Bud­get 2014 with a prag­matic recog­ni­tion of the needs of the com­mon man and a thrust to­wards struc­tural re­forms. Some of the in­cen­tives that would ben­e­fit se­nior cit­i­zens amongst oth­ers in­cluded changes pro­posed in re­la­tion to so­cial se­cu­rity, health­care and di­rect taxes.

Cer­tain mea­sures an­nounced by the fi­nance min­is­ter as a step to­wards so­cial se­cu­rity in­cluded pro­vid­ing min­i­mum pen­sion of ₹ 1,000 un­der the Em­ployee Pen­sion Scheme and ex­ten­sion of Var­ishtha Pen­sion Bima Yo­jana (to be re­vived un­til Au­gust 14, 2015). The an­nounce­ments in­cluded a pro­posal to set up a com­mit­tee to ex­am­ine and rec­om­mend how the amount be­long­ing to se­nior cit­i­zens not claimed on their demise or for want of pay­ment in­struc­tion, ly­ing with PPF, post of­fice, sav­ings scheme etc can be used for the wel­fare of se­nior cit­i­zens. The com­mit­tee is re­quired to is­sue its re­port lat­est by De­cem­ber 2014. A mea­sure has been ini­ti­ated by the re­tire­ment fund body — Em­ploy­ees’ Provident Fund Or­gan­i­sa­tion ( EPFO) to al­lot a uni­ver­sal ac­count num­ber (UAN) to all its mem­bers for their con­ve­nience and to fa­cil­i­tate porta­bil­ity of provident fund ac­counts.

Over and above the pro­pos­als of so­cial se­cu­rity and health­care, the di­rect tax pro­pos­als of Bud­get 2014 have been tax-friendly. The tax pro­pos­als as con­tained in Fi­nance (No 2) Bill, 2014 have been passed in both houses of par­lia­ment and have re­ceived the as­sent of the pres­i­dent, and are now ef­fec­tive. On a go-for­ward ba­sis now, the ba­sic ex­emp­tion limit for in­di­vid­u­als who are res­i­dents and above the age of sixty years but less than 80 years would stand in­creased to ₹ 3 lakh as against the ear­lier thresh­old of ₹ 2.5 lakh, re­sult­ing in a tax sav­ing of ap­prox­i­mately ₹ 5,000.

Apart from the in­crease in ex­emp­tion limit, the changes in the In­come Tax Act of­fers in­creased de­duc­tion for in­ter­est while com­put­ing in­come un­der the head ‘house prop­erty’. This area has been over­looked since a decade and with high in­ter­est rates and tight liq­uid­ity, the limit of de­duc­tions has been re­vised. Un­der the ear­lier tax regime, de­duc­tion of in­ter­est on hous­ing loan for self-oc­cu­pied prop­erty was re­stricted to ₹ 1.5 lakh per an­num which has now been in­creased to ₹ 2 lakh. Higher de­duc­tion will also be al­lowed un­der sec­tion 80C for prin­ci­pal re­paid on such hous­ing loan, the limit for which has now been in­creased to ₹ 1.5 lakh per an­num from the ear­lier limit of ₹ 1 lakh.

The abil­ity to seek a higher de­duc­tion for in­ter­est as well as on the prin­ci­pal re­pay­ment en­ables a higher re­ten­tion of much needed dis­pos­able funds for the se­nior cit­i­zens and tax pay­ers at large.

Another as­pect that mer­its at­ten­tion is a change that has been brought in in re­la­tion to rein­vest­ment in another house. While at times there is a de­sire to trans­fer the ex­ist­ing house to buy a larger house to ac­com­mo­date the grow­ing fam­ily, there are cases where the house that is owned by the el­der in the fam­ily is trans­ferred to ac­quire more than one house to ac­com­mo­date fam­ily needs. Based on ju­di­cial prece­dent, prior to the change in law that is con­tained in Bud­get 2014, it was pos­si­ble to claim ben­e­fit of cap­i­tal gain ex­emp­tion un­der sec­tion 54 where the in­vest­ment was made in a larger house by com­bin­ing two or more houses and re­gard­ing the same as a house. How­ever, in view of the re­cent amend­ment, ben­e­fit of ex­emp­tion would now be avail­able only in re­spect of one house. While these pro­vi­sions have ad­mit­tedly been en­acted to pro­vide bet­ter clar­ity, there could still be some am­bi­gu­ity around what con­sti­tutes one house.

The cur­rent in­come tax leg­is­la­tion also con­tains an en­abling pro­vi­sion that pro­vides a win­dow for a tax­payer to have reg­u­lar flow of in­come. The ex­ist­ing tax regime pro­vides for a tax-friendly scheme in the form of re­verse mort­gage of house prop­erty. There’s another amend­ment that could have im­pli­ca­tions for tax pay­ers who sought to trans­fer a cap­i­tal as­set but the trans­ac­tion did not fruc­tify for var­i­ous rea­sons, re­sult­ing in the ad­vance be­ing paid by the seller be­ing for­feited. The amended tax leg­is­la­tion (post Bud­get 2014) pro­vides that ad­vance money re­ceived and for­feited would be tax­able in the year of for­fei­ture, un­like the pre­vi­ous pro­vi­sion that per­mit­ted the same to be ad­justed against the cost of the as­set, re­sult­ing in de­fer­ral till fi­nal sale of the cap­i­tal as­set.

SHUTTERSTOCK

IMAGESBAZAAR

Cer­tain mea­sures an­nounced by the fi­nance min­is­ter as a step to­wards so­cial se­cu­rity for se­nior cit­i­zens in­cluded pro­vid­ing min­i­mum pen­sion of 1,000 un­der the Em­ployee Pen­sion Scheme and ex­ten­sion of Var­ishtha Pen­sion Bima Yo­jana (to be re­vived un­til Au­gust 14, 2015).

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