It was the first Union budget of the new BJP led government and an important one as there are high expectations from people of all quarters that the government is going to kickstart the Indian economy, create jobs and bring all round development. The budget also indicates the broad path that the government is going to take in managing the country. Let us look at what the Budget offers to the ‘Aam Aadmi’ –
Union Budget 2014 from a Personal Finance Perspective
- From an earnings perspective, income tax exemption limit raised from Rs 2 lakhs at present to Rs 2.5 lakhs which means one will pay less tax. Approx Tax Saving: Tax Slab 2-5 Lakh = Rs 15000, 5-10 Lakh = Rs 25000, Abpve 10 Lakh = 36000.
- For Senior Citizens, income tax exemption limit raised from Rs 2.5 lakhs to Rs 3.0 lakhs.
- The monthly pension from EPFO under the EPS-95 scheme is increased to Rs. 1,000. Till now people with monthly wage of Rs. 6,500 can subscribe to EPFO schemes. The monthly wage limit has been increased to Rs.15,000 which means more people can benefit from EPFO’s social security schemes.
Savings & Investments
- In terms of investment, Section 80C investment limit has been raised from Rs 1,00,000 to Rs 1,50,000 for tax benefits.
- Tax exemption on interest component of housing loan has been raised from Rs 1,50,000 to Rs 2,00,000.
- Annual Public Provident Fund PPF ceiling to be enhanced from Rs 1 lakh to to Rs 1.5 lakhs.
- On the flip side, from an individual perspective, Long Term Capital Gain tax on Debt Mutual Funds (& even gold funds) is increased from 10 % to 20% and tenure increased from 1 year to 3years. This will have some serious impact on people who are in higher tax brackets, you have to stick with your plans so that you save on taxes.
- Your insurer will deduct tax at source of 2 per cent from maturity proceeds of a life insurance policy if the premium paid is more than 10 per cent of the sum assured (or where 10 (10 d) doesn’t apply).
- Other investment schemes introduced include
- A special small saving scheme will be introduced encourage savings towards education & marriage of girl child
- Kisan Vikas Patra (KVP) to be reintroduced for planned and unplanned savings under small savings schemes
- Varishth Pension Bima Yojna to be revived for citizens aged 60 & above.
Management of Personal Finance
- There is a proposal to introduce one demat account for all types financial transactions
- KYC norms would be standardised across the financial sector
- Level of FDI in Insurance is increased to 49%. This means more people will have access to insurance.
- Currency notes will have details in Braille (language for the blind) which indicates social inclusion
- A unified account will be launched by EPFO so that Provident Fund is easily portable & tracked.
- A fund will be kept aside for provision of low cost housing and giving cheaper credit to the poor to buy housing.
- In terms of purchasing power, items like computers, TVs with <=19” screens, diamond jewellery, packaged food and footwear are cheaper. People wanting to buy these should have a smile on their face.
- On the other hand, aerated drinks, tobacco products, cigarettes have become expensive. It is probably good as they are anyways unhealthy. Cigarette smoking is injurious to Health & WEALTH.
- More goods and services will come under the service tax net, so we should be prepared to shell out more money for some services like online and mobile advertising.
Some Developmental Steps that would directly affect the common man
- 5 IIMs and 5 IITs will be set up improving education facilities and allowing more number of people access to premier institutions
- AIIMS or similar institution will be set up in many more states which will help people get access to better healthcare facilities.
- There are lot of proposals and fund allocation for different sectors like agriculture, SMEs and large companies which will lead to economic development which will ultimately aide the common man in terms of job creation, competitive prices, new products and services and increased quality in goods and services.
- There are funds allocated for skill development, smart cities and entrepreneurship. These are steps in the right direction but remains to be seen how they are implemented and it will definitely take some time to have an impact. So we will have to wait and watch.
Did you follow the budget yesterday? How would you rate it? I would love to know which points do you think affect you the most?