Get More Info

  • Views Search

    Portfolio Tracker
  • : 10 key measures that affect you!

    10 key measures that affect you!

    The budget has once again come and gone. While it may have beaten expectations of some, it may also have depressed some. In this article, we highlight 10 key things that affect you directly and bring out their impact.

    1. Direct tax changes: For the individual, perhaps the biggest benefit came in the form of the FM's direct tax changes. Mr. Chidambaram, once again, tinkered with the personal tax brackets. The following are the key highlights of his moves.

      Taxable income Tax payable (Slab)
      Upto Rs 100,000 (Rs 1 lakh) Zero
      From 1 lakh to Rs 1.5 lakhs 10%
      From 1.5 lakhs to Rs 2.5 lakhs 20%
      Above Rs 2.5 lakhs 30%

      For women, the tax exemption limit has been raised to Rs 1.25 lakhs and for senior citizens this level has been raised to Rs 1.5 lakhs.

      Further, the surcharge of 10% on the taxes is now applicable only to individuals with taxable income of Rs 10 lakhs or more.

      All these measures will be a big positive to the spending power of the Indian middle class.

    2. Sec-88 scrapped: The Finance minister has done away with Sec-88. Instead, taxpayers will now be allowed a consolidated limit of Rs 1 lakh for savings as deduction from the income before tax. This Rs 1 lakh will include the provisions of pension U/S 80 CCC, the tax mutual funds (ELSS), government bonds, pension funds, provident funds and insurance policies etc. without any specified demarcation. This new Rs 1 lakh limit is now called Sec 80 CCE.

      This move too, is a big booster for individual tax payers, who have so far largely invested based on tax exemption considerations. In doing so, they have often invested in not so lucrative investment instruments. The move is a step towards encouraging a prudent financial planning, where in the investor is free to choose what best suits him/her.

    3. Sec 80L omitted: However, a key dampener for the individual tax payee is the omission of Sec 80 L that dealt with tax exemption of Rs 15,000 on income/dividend etc. earned from bank deposits, government securities etc. This will hit assesses whose incomes are based on fixed income generated by these instruments. However, in our view, net, net, the individual assessee has gained from this budget.

    4. Tax evasion moves: in a bid to put high transactions under the tax scanner, the FM has proposed a small 0.1% levy on all cash withdrawals of Rs 10,000 per person per day. This works out to be Rs 10 per Rs 10,000 per day withdrawal. Also, banks will now be required to report all deposits, which are exempt from TDS on interest. So next time you visit an ATM, be sure to withdraw lesser than Rs 10,000 per day and plan your finances well ahead. Please remember this levy is on only 'cash' withdrawals.

    5. Removal of mobile telephone from '6' criteria: You can go ahead and buy a mobile without any fear for filing tax returns. The mobile phone has been taken out of the 'six' criteria under which you necessarily have to file a tax return. Instead, if your electricity bill touches Rs 50,000 or more per annum, then you have to compulsorily file a tax return.

    6. A/C's, Tyres to become cheaper: The excise duty on Air conditioners, tyres and Polyester Filament Yarn has been pruned to 16% from 24% earlier. So these will become cheaper. Surcharge on tea, refined edible oils and vanaspathi has been abolished, so these will also become marginally cheaper.. However, branded jewellery will become costlier by 2%. Cigarettes, chewing tobacco, and gutka will become costlier.

    7. Petrol/ diesel/ LPG relief: The FM has halved the customs duty on crude petroleum, and made it zero in case of LPG and subsidized kerosene. Customs duty on diesel reduced. All this will ensure that the running cost of your vehicle does not move up sharply. Housewives too will heave a sigh of relief. However, there will be a cess of Rs 0.50 paise per litre of diesel and petrol sold.

    8. Corporate tax: India Inc. will shell out lesser taxes, with corporate tax being brought down to 30% from 35% earlier. This and the implementation of VAT is likely to improve the competitive of the industry and will go a long way in etching out inefficiencies from the system.

    9. Service tax implications: Those entrepreneurs who are running small service set-ups have got a relief from the service tax net. Service providers whose gross turnover does not exceed Rs 4 lakhs per annum will be exempt from service tax. And for others, the service tax level remains unchanged at 10%.

    10. STT impact: If you are buying or selling equity shares, then the STT (transaction tax) burden has marginally gone up from 0.015% to 0.02% of transaction value. But in our view, this is not much to warrant a pessimistic view towards equities.

    Apart from the above micro moves, at the macro level the steady focus on infrastructure development, education, sanitation, irrigation, telephone connections for villages are likely to be key drivers for India in the long term and we are enthused by this. The growing recognition that until literacy, drinking water and electrification reach all corners of country, India will still remain 'developing' is a healthy sign. More importantly, a committee has been mooted to check out how much of the funds allocated have actually reached their targets. This will improve accountability in the long run.

    In our view, on the whole, Budget 2005-06 is a step in the right direction. It will induce prudent financial planning, allocation of resources, as also weed out inefficiencies of our system. The process is of course, long drawn. But then, Rome wasn't built in a day!

    Its about selecting the right stock... the right price!

    Equitymaster follows the value-investing approach to selecting stocks for investment. Subscribe to our premium research today!

    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...


    © Equitymaster Agora Research Private Limited |
    Why Personalfn? | Why Equitymaster? | Terms of Use | Contact Us | About Us