The Union Budget 2015 was more important for all of us. For the government it was a road map to show their seriousness while for us it was the expectation for relief from many areas of concern.Most analysis were debating whether it will be a populist budget or a future road map for a better India. In the end the budget 2015 delivered the latter.
After Railway Budget where Mr. Suresh Prabhu focused on repairing the house rather than go for some populism, the honorable finance minister also focused on “Make in India”. There was thrust on long term development of our economy with relief to various sections of the society. Where it benefits you and where it impacts you is an analysis we all have to do.
Here is a review of what union budget 2015 holds for you:
Benefit For Middle Class
Although expectation were some change in the exemption limit Honorable Finance Minister rather brought benefits in the form of deductions. These were well thought out but some may not appeal to everyone. Below are benefits which have been rolled out to us:
- Sec 80D Enhanced: Limits under Sec 80D for health insurance premium have been enhanced from R 15000 to R 25000 for age below 60. For senior citizens the new limit is R 30000 up from R 20000. So if you are paying premium for your parents you can claim deduction of R 55000 in total.
- Sec 80DDB and 80U Enhanced: Sec 80DDB pertains to deduction on expenses towards medical treatment for some specific diseases. The limit to claim deduction under this section is R 60000 which has been enhanced to R 80000 now for very senior citizens i.e. above age 80. Similarly 80U pertains to claiming deduction for expenses towards disabled dependent. The limit of R 50000 here has also been enhanced to r 75000 and from R 1 lakh to R 1.25 lakh for severe disability.
- NPS Contribution Enhanced– The government is encouraging you to invest for your retirement. To do this the limit to contribute in NPS has been increased to R 1.5 lakh under section 80C. However an additional benefit also has been introduced under sec 80CCD wherein you can claim for additional R 50000 if you invest in this scheme.
- Pension Plans: The limit of deduction for investing in any life insurance pension plans under section 80CCC has also been enhanced to R 1.5 lakh in line with earlier budget provisions of enhancing Sec 80C limit.
- REIT: Real Estate investment trust also gets a small mention wherein the rental yields have been given pass through status for asset Management Company. This will give a much needed push to launch REIT in India thus giving you another favorable investment option soon.
- EPF: It is proposed in the budget that the employee needs to be provided two options. Firstly, the employee may opt for EPF or the New Pension Scheme (NPS). Secondly, for employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution. Even the ESI should be optional with a choice to choose any health insurance scheme recognized by IRDA.
New Options
Where the finance minister has enhanced exemptions in many areas he has rolled out some new options for us.
- Gold Deposits: Gold has been the favorite investment but there is lot lying with us which neither gets traded nor gets monetized. To ensure R 20000 tonne of gold with us gets useful the gold monetization scheme has been launched. Under this scheme the gold depositors will be able to earn a fixed interest on their metal account and jewelers will also be able to avail a loan on it. Not only this banks and dealers will also be able to monetize the gold deposit. The second option for investors will be gold sovereign bonds where you will get a fixed interest and will be able to avail a cash value on maturity equivalent to the face value of the gold.
- Tax Free Bonds: Much like last year investors will be able to invest in tax free bonds this year. The government has allowed few institutions to issue tax free bonds for the long term infrastructure funding. It will be interesting to see what rates are offered but will be beneficial for the retirees looking for regular income need.
Where You Are Hit?
The increase in service tax from 12.36% to 14% makes things costlier for you. Your expenses such as travelling. dining, premiums of your insurances etc… will get increased due to this impact. Even the services you will avail on your investments via mutual fund or life insurance agents may also get costlier. If you are making a household budget then you may see a rise in your outgoes due to this increase. Although the decision by the government is in line with implementation of Goods and Services Tax (GST) by 1st April, 2016 the expectation of increase in any exemption limit or change in tax slab in this budget is making it looks more costly.
Thrust On Social Security
There has been a thrust on bringing some kind of social security to the most needy i.e. poor and underprivileged and so few provisions have been introduced. There will be an accidental insurance of R 2 lakh under Pradhan Mantri Suraksha Bima Yojna, a death insurance of R 2 lakh under Pradhan Mantri Jeevan Jyoti Bima Yojna and a defined pension under Atal Pension Yojna where the government will also contribute 50% of the amount with a cap of R 1000 per year for next five years. There is also a huge unclaimed money (Approx R 3000 cr) lying in EPF and PPF which is proposed to be diverted to subsidize the premiums of vulnerable groups such as old age pensioners, BPL card-holders, small and marginal farmers and others. There are few others provisions in the budget for them.
The Long Term Thrust
The budget 2015 has focused on the long term growth of India for which measures to improve our basic infrastructure, manufacturing efficiency, education and many other areas have been announced. The reduction of corporate tax to 25% with removal of exemptions, allocation towards various sectors and section of the society along with special benefits for poor has been a major focus of this year budget. The black money curb, bankruptcy law, financial inclusion by making post office banking services, allocation of central revenue to states and many others such measures gives a good intention of the ruling party to transform Indian Economy.
What You Should Do?
There may not be many takeaways from this budget in the short term but the budget has not brought any major hit to your personal finance. Senior citizens have been given good benefits which they can avail. The increase in pension benefits gives you more room to plan your retirement early. For disabled the relief is only the increase in tax benefits but more or less the budget has nothing for them. They are surely disappointed. For rest the exemptions or deduction gives you more money in your hand but simultaneously increase of services tax make payout higher. From financial planning perspective the revisit to your expenses is necessary to see how it is actually impacts you. The remembrance of thumb rule on savings (25-30%), debt (max 25-30%) will hold good when you review.
What you feel about the budget?
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