The collective voices of senior citizen through Moneylife Foundation and many others has finally been heard. The government has announced that reverse mortgage annuity would be tax-free. However, there is lot more that needs to be done, including regulation, to make senior citizens live a dignified life

Sucheta Dalal

A sign that India is waking up to the needs of its aging population is the sudden boost to reverse mortgage (RM) products through a change in tax treatment. RM allows senior citizens, who are short of money, to mortgage their property to a bank and get monthly payments in the form of annuities (through an arrangement a bank has with an insurance company). Annuities are taxable but those from RM will be tax-free as per the new thinking. The government has also allowed payments to be made for the lifetime of the borrower by removing the absurd cap of 20 years laid down earlier. It has taken more than three years for the government to accede to requests from industry and NGOs, including Moneylife Foundation, to make annuities tax-free. Why is this so important? Because, in times of galloping inflation and healthcare costs, senior citizens are able to draw down the value of their homes to generate spending money while continuing to live there for their lifetime.

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