While the Gen X, the millennials and the digital natives are hogging all the limelight and add on to the demographic dividend of our country, there will soon be 100 million Indians, the post-independence kids, who have paid their dues in taking the country to where it is today. These are the men and women, born after 1947, now in their sixties and beginning to enter their seventies.
While the younger generation of Indians, less than 35 years, constitute more than 65 percent of our nation, the category of individuals over 60 is also growing and will cross 100 million by 2020.
The prime minister, in his nationally-televised speech on 31 December 2016, has recognised these senior citizens and announced an interest rate of 8 percent for a fixed deposit of a 10-year period. What can the retirees expect from the much-anticipated national budget post demonetisation? This question is best answered if we consider the financial needs of the retirees.
Tax Exemption for Senior Citizens
The Income Tax Act has two categories for senior citizens. Those between 60-80 years are referred to as ‘Senior Citizens,’ and those above 80 years are referred to as ‘Super Senior Citizens’.
The tax-free income is Rs 3 lakh and Rs 3.5 lakh respectively for the two categories. The ‘Senior’ and ‘Super Senior’ citizens would benefit immensely if this limit were to be increased to Rs 5 lakh and Rs 10 lakh respectively.
Special Financial Product
Barring the retirees from the government and public sector, most other retirees do not have access to pension and rely on their savings. Very few individuals know what to do with their life’s savings. There are very few pension schemes for the retirees. What every retiree wants is an investment whereby they can invest a lump sum and get a monthly annuity.
The government should introduce special incentives for mutual funds, banks and financial institutions to launch such financial products, exclusively for people over 60-years of age.
Leniency on Loans
Senior citizens often depend on loans to build new homes. The prime minister has announced attractive reduction in interest rates for the senior citizens who want to avail housing loans of up to Rs 9 lakh and up to Rs 12 lakh.
Further subsidy on such loans at higher slabs and a similar subsidy for vehicle loans would be a welcome step for the senior citizens.
Benefits of Reverse Mortgage
Most senior citizens in India are asset-rich, but cash-poor.
Their homes, built on land purchased several decades back, are worth a lot of money and yet they struggle to meet their daily needs. While the reverse mortgage scheme is in place and the government has already ensured that any money received through reverse mortgage will be tax-free, very few people are aware of this and even fewer take advantage of the scheme.
The government needs to publicise this reverse mortgage scheme and announce additional incentives, so that the senior citizens can unlock the huge value of their homes and live the last three decades of their lives amidst financial safety and security.
Affordable Old Age Homes
Given the large number of senior citizens, who are now living alone after having raised their children, the need for social security and friends in the community is becoming very critical. While assisted living homes are coming up in several parts of the country, these are expensive and highly-priced. The builders are constrained to charge high prices because of the high cost of land.
The government should consider giving subsidised land in the budget, specifically for building such old age homes or assisted living homes.
Health Insurance
Almost 70 percent of Indians do not have access to any form of medical insurance. The largest group comprising over 300 million Indians are covered by the government’s medical insurance. Only about 75 million Indians are covered by the private medical insurance companies.
The insurance premium of up to Rs 15,000 is permitted as a tax deduction, while it is Rs 20,000 for the senior citizens. This limit needs to be increased substantially since the premium is much higher even for a small medical cover of Rs 5 lakh.
Cost of Medicines
The government needs to provide funds in the budget to roll out the Jan Aushadhi stores across India so that the senior citizens can get access to the reasonably-priced medicines. At the same time, more medicines should be brought under the Drug Price Control Order so that the prices of medicines are more affordable.
Medical Care
While the governments in the USA and other developed countries provide the retirees over 60 years the right to sign up for Medical Care at government’s cost, no such scheme exists in India. There is a provision for the EWS (Economically Weaker Section) to get free medical treatment at the government-owned hospitals, but such facilities exist only on paper.
The I-T provisions allow a deduction of Rs 40,000 for the medical treatment of specified diseases. For senior citizens this limit is Rs 60,000. Given the high medical costs, this limit needs to be increased significantly for the senior citizens.
With no more recurring income from any form of employment, most retirees are relying on their retirement savings to support their needs for sustenance like utilities, food and medicines.
The government, therefore, needs to play a significant role to support our senior citizens. Long-term schemes and well-planned tax reforms and incentives will go a long way in easing the anxiety and stress of retirement that all retirees are fraught with.
(Ashutosh Garg is the founder-chairman of Guardian Pharmacies and an author. He can be reached @gargashutosh. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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