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How Has The Budget 2019 Impacted Your Personal Finance? - Outside View by PersonalFN

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How Has The Budget 2019 Impacted Your Personal Finance?
Feb 8, 2019

Media houses have been barraging their audience with budget-related news since the interim finance minister presented interim budget 2019.

But are you still struggling to find out what has changed for you exactly?

Don't go anywhere else to read about it.

Here we present the top announcements made by finance minister that will affect your personal finances.

A whole host of tax reforms to place more money in the hands of tax savers


  • Giving a major relief to middle class tax payers, the government proposed to give full tax rebate on taxable annual income up to Rs 5 lakhs. In other words, those with a gross annual income of Rs 6.5 lakh won't have to pay any tax provide they invest in specified investment avenues eligible for claiming tax deductions under section 80C. Nearly, 3 crore tax payers will enjoy the benefit of the proposed tax reform.
  • In the interim budget 2019, the government proposed to raise the standard deduction limit from present Rs 40,000 to Rs 50,000.
  • The government proposed to exclude the notional rent on second self-occupied home from the ambit of tax. So far, many house owners were paying tax on their second home despite earning any rent on it.
  • The government also proposed to tweak the provisions of Section 54. As a result, now investing the sales proceeds of one house property in two houses to claim capital gains tax relief will become possible.
    • Implication: Effective implementation of these announcements will ensure that taxpayers have more money to spend and invest. As a result, consumer-centric businesses will get a boost. Government's tax collections through Goods and Services Tax (GST) may also go up due to increased consumption.

      Please remember

      If you are a beneficiary of aforesaid tax reforms, you should be careful while spending your surplus. In fact, you can effectively channelise your discretionary income for achieving your financial goals.

      [Read: Which Are The Best ELSSs (Tax Saving Funds) For 2019? ]

      Income tax department to become more taxpayer friendly

      According to government records, 99.54% income tax returns for FY 2017-18 were accepted as they were filed. In other words, this denotes that income tax return filing has become frictionless to a large extent as the tax department contested and scrutinised only a fraction of total returns filed.

      The government has planned to overhaul the present tax machinery and make it efficient to process all returns within 24 hours of filing and issue refund orders simultaneously.

      The government is working on an ambitious project, where it aims to complete almost all verification and assessment of returns selected for scrutiny to be done electronically through anonymised back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers.

      Implication: This will make the entire process of tax filing friendlier and instances of harassment of taxpayers by the officials could drastically reduce. It also means, the scope for corruption will reduce.

      What should you remember?

      You should be more careful while filing your tax returns because the department is getting more techno-savvy, highly vigilant, and therefore more efficient. The tax department might easily catch inconsistencies in your tax return which might later prove costly for you.

      Threshold for the applicability of TDS raised on certain incomes

      Budget 2019 has proposed to increase the threshold limit on Tax Deducted at Source (TDS) on interest earned on bank/post office deposits from Rs 10,000 to Rs 40,000. This will save investors from a process of claiming refunds. Moreover, there won't be incidence of TDS upto rent income of Rs 2,40,000. Earlier, this threshold was Rs 1,80,000.

      One more step to make affordable housing a success...

      For making more homes available under affordable housing, the benefits under Section 80-IBA of the Income Tax Act is being extended for one more year, i.e. to the housing projects approved till 31st March, 2020.

      Although individual taxpayers won't directly benefit from this, the overall availability of affordable houses might go up. This could enable other individuals to buy their dream home.

      Social security system to get a major boost...

      In a move to beef up India's social security system, the government is set to launch a new mega pension scheme-Pradhan Mantri Shram-Yogi Maandhan Yojana, for people working in the unorganised sector whose monthly income is Rs 15,000 or less.

      The government aims to provide a monthly assured pension of Rs 3,000 to every subscriber after he/she turns 60. While the government hasn't announced details of the scheme, it claims that the contribution amount (for the subscriber) would be extremely affordable.

      As mentioned in the budget speech, a 29-year person joining the scheme will have to pay as low as Rs 100 per month for next 31 years to get a monthly pension of Rs 3,000 post 60. The government has announced that it will contribute the matching share in the pension account of the worker every month. According to government estimates, at least 10 crore people working in the unorganised sector are expected to benefit from this mega pension scheme.

      Implication: Pradhan Mantri Shram-Yogi Maandhan Yojana will help India take giant strides in transforming its non-pensioned society into pensioned one. For now, the government has allotted Rs 500 crore for the scheme. But it remains to be seen how much more it will cost the exchequer in the subsequent years.

      What you shouldn't forget?

      Although this scheme will support moderate income earners, they shouldn't rely only on it for their retirement. Prudent retirement planning is required. One should estimate funds needed to live a dignified life post retirement and invest as per personalised asset allocation to get there.

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      It is a DIY (Do It Yourself) retirement solution, whereby you can start planning for your retirement and potentially build a substantial corpus that could sustain you in the best days of your life.

      It is not merely a list of funds or a particular investment idea. It is a complete all-round solution to guide you with almost ALL the necessary essentials of retirement planning.

      You will receive a monthly series of reports and articles presenting the potentially best investment ideas and opportunities most suitable for a happy and blissful retirement. Subscribe now! .

      Author: PersonalFN Content & Research Team

      This article first appeared on PersonalFN here.

      PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


      The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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