Gift for Elders...

In an effort to bring financial relief to senior citizens, Budget 2008-09 has doused all contention regarding the reverse mortgage loan...

In an effort to bring financial relief to senior citizens, Budget 2008-09 has doused all contention regarding the reverse mortgage loan, which is meant to provide a regular income to senior citizens by mortgaging house property. As per the Budget the income arising out of the scheme will not be considered as income for tax purpose and hence will not attract any income tax. “So far we have not heard of any reverse mortgage scheme being sold primarily because the tax treatment was not clear. With clarity coming through we should see more of these products hitting the market,” said Ameet Patel, partner, Sudit K Parekh and co, a chartered accountant firm.

The Budget also extended the benefit of Section 80C to two instruments — Senior Citizens Savings Scheme and the five-year Post Office Time Deposit Account. However, the benefits of Section 80C will come into effect only from April 1, 2007, i.e., from financial year 2007-08.
Senior Citizens Savings Scheme is a five-year scheme that offers a return of 9 per cent payable quarterly. However, it comes with an investment cap of Rs 15 lakh. This investment qualifies for tax deduction up to Rs 1 lakh under Section 80C. The account can be extended by three more years. Post Office Time Deposit however ranges from 1-5 years. It is on the five year term that qualifies for a tax deduction and it offers a rate of 7.5 per cent. “The investor should maximise the Senior Citizen Savings Scheme since it offers nine per cent and in now under 80C. However, post office time deposit are not the best product going as of now. An individual would be better off through fixed deposit by the banks that come under Section 80C.”
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