While the Gen X, the
Millennials and the Digital Natives are hogging up all the limelight and creating
the much needed demographic dividend for our country, there are a large number
of Indians, the Post-Independence kids, who have paid their dues to the nation and
worked 60 hour weeks to bring 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% of our
nation, the category of individuals over 60 is also growing and will cross 100
million by 2020. These senior citizens span the large social strata of our
nation across societies and income levels and, given today’s healthcare
facilities, most of them should live for the next two to three decades.
The Prime Minister in
his nationally televised speech on 31st December 2016 has recognised
these senior citizens and announced an interest rate of 8% for a fixed deposit
for a 10 year period. This is a great beginning but does the Government really
recognize the needs of retirees?
What are retirees in
India looking for from the much anticipated National Budget post
demonetisation? This question is best answered if we consider the financial
needs of retirees.
Income Tax
The Income Tax Act has
two categories for senior citizens. Those between 60 years and 80 years who are
referred to as Senior Citizens and those above 80 years who are referred to as
Super Senior Citizens.
The tax free income is
Rs 3.00 lakhs and Rs 3.50 lakhs respectively for the two categories. Senior and
Super Senior citizens would benefit immensely if this limit were to be
increased to Rs 5.00 lakhs and Rs 10.00 lakhs respectively.
Given the rapidity with
which aging takes place, Government should consider three slabs for people
between 60 years and 70 years; 70 years and 80 years and above 80 years. A 20
year slab for senior citizens is too vast.
Pension and Monthly
Annuity
Barring the retirees
from the Government and public sector, most other retirees do not have access
to pension and have to rely on their savings. Most retirees have their savings
in their provident fund, public provident fund, gratuity and some additional savings.
This money is pulled out by them when they retire. Very few individuals know
what to do with this large amount of life’s savings. There are very few pension
schemes for retirees today. What every retiree is looking for is an investment
whereby they can invest a lump sum and get a monthly annuity.
Government could think
of introducing special incentives for mutual funds, banks and financial
institutions to launch such financial products exclusively for people over 60
years of age.
The guiding principle for
such financial products will have to be that they will develop Investment Plans
with monthly returns while ensuring capital protection. Returns guidelines
could be set at a minimum of 2% above the prevailing fixed deposit interest
rate.
Loans
Senior citizens look
for loans to build new homes and to expand existing homes since a lot of adult
children are coming back to live in the homes of their parents. The Prime
Minister has announced attractive reduction in interest rates for senior
citizens who want to avail housing loans of upto Rs 9 lakhs and upto Rs 12
lakhs. In addition, the PM has announced an attractive scheme for people
wanting to expand their homes in rural India.
Further subsidy on such
loans at higher slabs and a similar subsidy for vehicle loans would be a
welcome step for the senior citizens.
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. Most of us in India believe that we need to
leave our homes to our children who, I believe, have interest only in the value
of their parent’s home and after their passing, most such houses are sold.
While the Reverse Mortgage scheme is in place and Government has already provided
that any money received through a Reverse Mortgage will be tax free, very few
people are aware of this and even fewer take advantage of the scheme.
Government needs to
popularize this Reverse Mortgage scheme and announce additional incentives so
that senior citizens can unlock the huge value of their homes and live the last
three decades of their lives in financial safety and security.
Subsidised Land to
build 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 community living is becoming very
critical. Support groups are forming rapidly as senior citizens start to depend
on one another for support, instead of only their family members, in their
sunset years. While assisted living homes are coming up in several parts of the
country, these are expensive and highly priced. Builders are constrained to
charge high prices because of the high cost of land.
The Government could
consider giving subsidised land in the budget specifically for building such
old age homes or assisted living homes. Price bands would need to be
established so that genuinely affordable old age homes can be built and made
available. Obviously very strict norms need to be in place to ensure such
facilities are not misused by unscrupulous builders.
Health Insurance
Almost 70% of Indians
do not have access to any form of Medical Insurance. The largest group comprising
over 300 million Indians are covered by Government Medical Insurance. Only
about 75 million Indians are covered by private Medical Insurance companies.
Insurance premium up to
Rs 15,000 is permitted as a tax deduction while this is Rs 20,000 for senior
citizens. This limit needs to be increased substantially since premium is much higher
even for a small medical cover of Rs 5 lakhs.
The Government also
needs to encourage all employers to provide life time cover to their long
serving employees. This insurance cover could become a part of the monthly
human resource costs of every employer and the policy would continue on
superannuation. While working with employers to ensure medical cover, the Government
should also incentivise health insurance companies to cover a much larger group
of citizens at reduced annual premiums.
Cost of Medicines
Government needs to
provide funds in the budget to roll out the Jan Aushadhi stores across the
length and breadth of India so that senior citizens can get access to
reasonably priced medicines. At the same time more medicines should be brought
under the Drug Price Control Order so that medicine prices are made more
affordable.
Medical Care
While Governments in USA,
Canada and several other developed countries provide retirees over 60 years the
right to sign up for Medical Care at Government costs, no such scheme exists in
India. There is a provision for the Economically Weaker Sections to get free
medical care at Government owned hospitals but everyone knows that such
facilities exist only on paper. This needs to change fast.
The Income Tax
provisions allow a deduction of Rs 40,000 for 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 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 most of all, medicines.
Most retirees know that they progressing towards the end of their days and
slowly, their bodies are beginning to give in to various forms of illness.
The Government, therefore, needs to play a
significant role to support our senior citizens by providing tax incentives and
financial support in the coming Budget so as to ease the financial strains most
retirees face. Good long term schemes and well planned and executed tax reforms
and incentives will go a long way in easing the anxiety and stress of
retirement that all retirees face.
*******************
The author is the founder Chairman of
Guardian Pharmacies and the author of 5 best-selling books, Reboot. Reinvent.
Rewire: Managing Retirement in the 21st Century; The Corner Office; An Eye for
an Eye; The Buck Stops Here - Learnings of a #Startup Entrepreneur and The Buck
Stops Here – My Journey from a Manager to an Entrepreneur.
Twitter: @gargashutosh
Instagram: ashutoshgarg56
Blog: ashutoshgargin.wordpress.com |
ashutoshgarg56.blogspot.com
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