We are now in April 2015 and most of us would have started planning for the year ahead. We will go through lot many changes as the budget and other provisions gets implemented which may bring change in our cash flows. If it results in any increase in our expenses then we will have to review them minutely to ensure we keep our savings target intact. Some provisions would have been implemented in last financial year which may even bring a change in our tax liability this year and so tax planning at this stage will do good in spreading our tax outgoes.
So let’s review the changes which have been implemented or going to be which will bring some changes in your finances forcing you to start planning ahead :
1. Budget Provisions
There were few provisions in the budget which will be implemented very soon. Among these provisions increase of service tax to 14%, higher deduction in health insurance and NPS scheme are the primary ones. The increase in service tax will hit your household budget to some extent while the increase deductions will allow you to save a bit more. There will be some more provisions which will be effected very soon. Read the Budget provisions
2. Small Savings Schemes Rate Increased
Every year on 1st April the government declares the interest rate on all small savings schemes for the current financial year. Any increase in these schemes is always a welcome news for the investors. This year interest rate on PPF, Senior Citizen Savings Schemes and most importantly Sukanya Samridhi Yojna have been increased giving opportunity to investors to earn more. Below are the new rates which will apply in financial year 2015-2016
3. Soon EPF or NPS
The budget provision of giving an option on EPF or NPS selection is gaining ground. Government is determined and taking all efforts to make this happen and soon the act will be amended to allow the change. Few private companies have started offering the option for employees joining after 1st April 2015 and others may follow. It will be a welcome step considering the possibility of NPS generating higher returns although the different tax treatment is the gap which still need to be filled.
4. Motor Insurance Premium Increased
Effective 1st April 2015 the third party motor insurance premium has been increased by 16-30%. So you will see a rise in the premium of your motor insurance policy. In isolation it may not make much of difference but when you club it with other provisions you will have to consider reviewing your cash flows to accommodate this increase.
5. TDS on Recurring Deposit
Till now RD enjoyed the self-declaration by the investor for taxability of its interest. Many would have escaped the tax ambit by not disclosing it or opting for other means. But with budget provisions TDS on Recurring Deposit has been introduced. Put simply now you will receive interest or maturity after the deduction of TDS thus forcing you to show it on your income tax returns to claim your no-taxable amount.
6. Nominee In Life Insurance
A nominee is only a custodian of your money and the actual recipient are your legal heirs. In life insurance also the nominee can act only as a custodian. There was no provision of money going directly to your legal heirs. You have to make provisions to include them as nominee but it does not avoid raising of disputes. This has also changed with few changes in the insurance act. Now you can add a beneficiary nominee in life insurance who will be the final recipient of the money. A welcome move wherein it will reduce the chances of litigations much like your EPF.
7. Changes in EPF
There have been changes in Employee Provident Fund which were brought out in 2014 and got implemented form 1st October 2014. These amendments would have changed the contribution towards your EPF . More changes are in pipeline wherein the early withdrawals will be difficult. A review of this will be needed to include in your tax planning and start looking at this investment more for your retirement plan.
8. Changes in Banking Services
In 2014 RBI allowed banks to charge for some services and as a result we have seen many changes in services charges of the banks. The latest of these rules was the limit on free ATM transactions from your own bank. Some banks have implemented it while some of the banks have done it partially. As a customer you need to make yourself aware about all the charges of your bank and the beginning of the financial year is a good time to review them so that you can utilize services accordingly.
9. Mutual Funds Taxation
Although this was done in 2014 it took a good enough time to understand the real implication. Putting it in a simple note now if you are investing in non-equity mutual funds like debt funds your long term capital gains taxation be only when you hold your investment for at least three years. The tax will be 20% with indexation and no more a 10% provision. In short term it will be added to your income and will be taxed accordingly. Although it make the short term taxability of these funds at par with traditional instruments like FDs there will always be probability of earning higher returns than them.
10. Capital Gains Exemption
Budget 2015 have limited the investment in capital gains bonds to R 50 lakh and investment in property to only one residential property under Sec 54 & 54F. If your capital gains gets derived in this financial year then you need to be clear on these provisions to derive the benefit of capital gains exemption.
There will be many more provisions which left mentioned here like property transactions in cash reduced to R 20000, Pan mandatory and many more. Some or all of these will have implications on your finances. The wiser approach is to take note of all these changes. One of the important benefit of Financial Planning is that it can accommodate such changes easily and you can take corrective measures to stick to your roadmap. April is a good time to review and plan for the year. If its time you reviewed your finances start now.
Have you reviewed changes in your finances? How you are implementing it?
Share your views….
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