Budget 2015: How does it affect your personal finances?

The Budget is something most of us look forward to with excitement. Our top most concern with the budget is to see if there are any changes in tax slabs which could affect us positively, leaving us money to spare. This year we are done and dusted debating the budget and registering the fact that there are no changes in slabs for us tax payers. Though, while the slabs have not changed, there are some announcements which could impact your personal finances.

1. Deduction for INR 50,000 p.a. for investments in National Pension Scheme (NPS)
This budget has provisioned for deduction of INR 50,000 for investments in NPS, under section 80CCD. This is over and above the deduction of INR 150,000 already available under section 80C. One must note that while investments in NPS are exempt from tax the proceeds are not tax exempt. Currently part of the corpus accumulated through NPS can be withdrawn as lumpsum on maturity and the rest will be given as annuity post maturity; both of these will be taxable.

2. Increase in limit for medical insurance from INR 15,000 to INR 25,000. For senior citizens the limit has increased from INR 20,000 to INR 30,000
You can now claim a higher deduction for premium paid towards medical insurance under section 80D. While deduction allowed for non-senior citizens has been increased from INR 15,000 to 25,000, for senior citizens the limit has been raised from INR 20,000 to INR 30,000. Therefore if you are paying a premium for both your family (spouse, children & yourself) & your parents who are senior citizens, the total deduction available to you would be the lower of INR 55,000 & actual premium paid.

3. Transport allowance increased from INR 800 to INR 1600 per month
If your salary structure has an allowance called transport allowance, INR 800 per month totaling to INR 9,600 per year was exempt from tax. This amount has been doubled to INR 1,600 per month ie. INR 19,200 per annum.

4. Interest paid to beneficiaries in Sukanya Samriddhi Scheme will be tax free
A scheme to encourage savings for the girl child Sukanya Samruddhi was launched in January this year. This was a welcome option paying 9.1% interest (interest to be fixed on an yearly basis like PPF) aimed at encouraging long term savings for the education and marriage of the girl child. The interest to be paid was earlier taxable. This budget has made interest to beneficiaries in Sukanya Samriddhi account non -taxable which makes it an very interesting investment option.

5. Wealth tax abolished
The number of people paying wealth tax may have been very small but the law required anybody having assets in excess of 30 lakhs to pay wealth tax. Many people who did not pay wealth tax were on the wrong side of law, and in such cases, ignorance cannot be a defense. This budget has abolished wealth tax to be replaced with a surcharge for the super-rich. This has done more for our peace of mind than for our finances.

The finance minister during the course of his budget speech said that relief to the tax payer will be to the tune of INR 4, 44,200. The calculation he was referring to is as follows
1) INR 1,50,000 under section 80C
2) INR 2,00,000 for repayment of interest on a home loan for self-occupied house (For a house which is let out on rent, entire interest paid can be set off against house rent received )
3) INR 25,000 under section 80D for premium paid towards health insurance (if you have parents who are senior citizens whose health insurance premium is paid by you the deduction will go up to INR 55,000 as mentioned above)
4) INR 19,200 towards transportation allowance

Few more points which need to be noted are

• The increase in service tax from 12.6% to 14% is an indirect hit since service providers transfer this cost to the end customer. This can be a substantial hit.
• If you are a salaried person you can now choose between investing in EPF & NPS.
• Employees with salary below a certain level will be allowed to choose if they want to continue their contributions to EPF or stop the same; the employer will still be obligated to continue his contributions.
• Gold scheme to be introduced, where you can deposit physical gold (except in jewelry form) and earn interest on it.
• Gold bonds to be introduced where the movement of price of bonds will mirror gold prices.
• While interest paid on Recurring Deposits were taxable, TDS was not being deducted from the same.