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Suresh Krishnamurthy

WHEN the Finance Minister announced the new rates of taxation of personal income in February, all taxpayers excepting senior citizens would have rejoiced.

For senior citizens with income above Rs 1,50,000, tax incidence would have gone up in the forthcoming assessment years. With the amendment to the Finance Bill, the Finance Minister has substantially rectified this anomaly.

The increase in exemption limit by Rs 35,000 restores the status quo for senior citizens, who receive a major portion of their income in the form of pensions and interest. Previously, income up to Rs 1,95,000 would not suffer tax if senior citizens were able to claim standard deduction for pensions received. Now, Rs 1,85,000 is not subject to tax. For most senior citizens, the amendment would ensure that they are not worse off under the new regime even if they do not receive any substantial benefit. Roughly, income of just more than Rs 15,000 per month will now not be subject to tax.

Senior citizens who invest in instruments that fetch them tax savings, however, would be able to reduce their tax incidence after the amendment.

For instance, senior citizens with income of up to Rs 2,85,000 need not pay tax under the new regime if they invest Rs 1 lakh in tax-saving instruments.

In contrast, in the previous year, senior citizens with income of Rs 2,85,000 and making investments of Rs 1 lakh would have paid taxes of Rs 7,400.

In addition, the Finance Minister has also increased the tax benefit for women marginally. The increase in tax slab by Rs 10,000 would reduce tax incidence by Rs 1,000.

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