I am a 64-year-old woman, and have been working in the private sector for the last 40 years, in a job where the salary is not bad. My earnings could not have bought me luxury, but I have lived well.
The living well, however, did not include foreign holidays, lifestyle spending, beauty parlours, spas or visits to Ayurvedic centres, and battery of domestic helps. This should convey that I lived within my means—a simple middle class life. I did save, take housing loans, build a place and educate my daughter.
Same is the story for my husband, who will turn 70 in a few months.
The last 10 to 15 years was when we had what may be called “savings”. And it was only then that I realised that, sooner or later, our earning years would be behind us. Unlike my friends who retired from the government, who get pensions that would rise with the next Pay Commission, the day we retire, we would have to depend totally on our savings.
When we heard about mutual funds, we were not convinced about things like the “fine print” and the “red herring”. Yet, we decided to take the risk, and invest in equity-based mutual funds. Like what most personal finance advisers suggest, part of our money were parked as term deposits in banks, to hedge us from the volatility of capital markets. Thanks to that, we braved the meltdown of 2008.
We have always paid our taxes religiously, often times not availing the benefits we could have—largely our fault. It was only about four or five years ago that I realised that with the way our savings were parked, we would not even have a 'pension', or the interest income, which would not be even 40 per cent of our current earnings.
True, I don't have to build a house now. I dont' have to pay college fees. But I spend more on our medicines: for blood sugar, cholesterol, asthma... the list is endless. And, we routinely do our preventive health check up.
Now, the company I work for reimburses small costs on medicines. It also provides health insurance. However, that has not stopped me from buying my own policy, which I have been doing for close to 20 years now. Occassionally, like this year, we spend at dental clinic. Sometimes, that itself runs into Rs 40,000-50,000.
The ever-rising enormous sum that goes into our Mediclaim Policy does not take care of that because it is not life threatening or emergency health care. In fact, I believe that we have not landed in hospitals that would need our insurance company to step in and pay the claim because we never hesitate to spend on minor issues or keep doctor consultations pending. (The other side of the story is that it is not the cost of insurance that is important. The more important thing is to ensure the third-party administrator pays, which is often a quite difficult.)
Let's come back to the main story.
I figured that when I retire I would not get even 40 per cent of what we are earning currently because the interest income on savings over Rs 10,000 a year is taxed. The budget declared that interest income upto Rs 50,000 a year will be exempted from tax.
There is no way that I can have fixed deposits that will fetch me more than Rs 50,000 a month, unless I pay income tax, just like a young, salaried employee. Even if the finance ministry gets to know from PAN, Aadhaar and KYC (Know your Customer) that a person is retired from the private sector, has no pension other than interest income, he or she cannot aspire or plan for more that Rs 50,000 a year without paying tax. That surely hits one's right to live a good retired life.
Slowly, I started parking more money, through SIPs, in equity mutual funds, and availed all my benefits under Section 80 C, by investing in ELSS. This, despite a million times reading that as I get old, I should withdraw it bit by bit from the harsh and volatile equity market. Because I also read that equity is the best way to grow your money.
There was the lurking fear that some day, the tax man will want a cut in the return on my mutual funds. And today, that fear has come true. It may be on capital gains on over Rs 1,00,000 a year, but that simply means Rs 8,333 a month. Even if the Budget 2018 gives senior citizens the benefit of exemption of tax on Rs 50,000, it amounts to that much a year. This when what most people need and expect of their investments is a return that helps them live a decent life.
My incomes all these years have been taxed. What was left to spend was further taxed as sales tax, VAT, customs, excise duty and now, the GST. What was left was taxed on account of the interest earned. And now, dividends will get taxed. When I spend the remaining, that will also be taxed.
Incidentally, it is the ordinary middle class people's saving or investment in the capital market that has really created the buoyancy, which the finance minister is wrongly attributing to the NDA government's reforms. It is, in fact, the result of the very nascent interest of small retail investors in equity markets and mutual funds. The Sensex and Nifty have reacted sharply to this, and who knows, a year down the line, the “buoyancy” may be a thing of the past.
The finance ministry will say they can get tax deductions. The crux of the story is that whatever one plans, the government will not allow anyone without a decent sarkari or company pension roughly half the last salary drawn, to live a life that requires more than Rs 2.5 lakhs a year—unless the government gets its cut.
There are some 'options', though. I donate all my money to the BJP for elections, and seek a free LPG connection, free electricity, free health insurance—all in the countryside where the air may be more fresh. And eat langar at the gurdwara.
The other option is, we all rise in protest to say that, “Hey, look at my details—I have invested my hard-earned money on which I have paid tax. I saved it for a decent living in my sunset years. I am not a robber. Neither am I a beggar”.
If politicians and government do not care for the aspirational senior citizen—and mind you, everyone will get there soon enough—it is time we mobilised support around this idea. For, this is not just my story alone.
(The author is the Deputy Chief of Bureau, THE WEEK, New Delhi)