Finance Minister Arun Jaitley announced the Union Budget 2015 on Saturday. Here’s a brief view on how it will impact you.
1) Your lifestyle just got costlier.
The increase in the rate of service tax to 14% from 12.36% has ensured that.
Eating in restaurants, visiting salons and spas, watching a movie in a theatre, going to an amusement park and all such other activities will now be a tad more expensive.
Of course, professional services will also cost more – lawyers and chartered accountants to be precise. Incidentally, but very pertinently, insurance premiums would get more expensive as a result.
The hike in excise duty will result in aerated beverages and cigarettes being costlier.
Thanks to the increase in the tax base on airfare, air travel will cost more.
2) You have some flexibility in your provident fund savings.
Employers now have the option to choose between the the Employees' Provident Fund, or EPF, and the National Pension Scheme, or NPS.
Employees below a certain threshold of income may soon find that contributions to their EPF are completely optional. They can do their tax saving via Section 80C in whichever avenue they deem fit. And the good news is that the employer's contribution stays, whatever their decision.
3) Wealth tax has been abolished.
The intent of this law was to tax assets that do not generate an income – jewellery, ornaments, real estate in certain cases, a car, a boat or yacht or aircraft, and so on and so forth. Wealth tax, a direct tax, has now been abolished.
That does not mean the super-rich walk away scot free – an additional 2% surcharge is levied upon them (it has gone up from 10% to 12%).
Incidentally, the super-rich is a category for those who have an income of more than Rs 1 crore.
4) There are tax reliefs despite no change in the tax slab.
Contributions made to the Sukanya Samriddhi Scheme are eligible for deduction under Section 80C of the Income Tax Act, 1961. What’s more, interest earned is also tax free.
Sukanya Samriddhi Scheme is a new entrant in the small-savings schemes category aimed at encouraging savings for a girl child's education and marriage. It was launched this year. Investments in the scheme are eligible for deduction under Section 80C. In his Budget speech, the financial minister stated that even the interest earned shall be tax free.
Tax exemptions for contributions to health insurance have increased from Rs 15,000 to 25,000. For senior citizens, the limit has been increased from 20,000 to 30,000. Therefore, the total deduction available under Section 80D has been increased to Rs 55,000 from the earlier deduction available of Rs 35,000.
The finance minister stated that the individual tax payer’s relief would be to the tune of Rs 4,44,200.
That break up would be:
- Rs 1,50,000. Deduction under Section 80C.
- Rs 2,00,000. Deduction on account of interest paid on a home loan.
- Rs 25,000. Deduction under Section 80D which refers to premium paid for health insurance.
- Rs 19,200. Transport allowance.
- Rs 50,000. Deduction under Section 80CCD. This refers to investments in the National Pension Scheme, or NPS.
5) If you want to buy gold as an investment, then you have an option.
Indians love gold and will continue to do so. The government knows it cannot fight that but can work around it.
A Sovereign Gold Bond will be introduced as an alternative to purchasing physical gold. The bond or financial instrument will carry a fixed rate of interest and when investors sell the bond they will get the value of the gold.
In such schemes, investors buying gold don't get the metal in physical form, as in the case of coins or bars. Instead, they get a paper or certificate issued by the government saying they bought a certain amount of gold.
So if you believe that gold prices will rise in the future, invest in gold bonds. When the price of gold goes up the value of the bond price also goes up by the same amount. Meanwhile, you continue to earn a fixed rate of interest.
Under the Gold Monetisation Scheme, depositors of gold can earn interest in their metal accounts and jewelers can obtain loans in their metal account. Banks and other dealers would also be able to monetise this gold. This will help mobilise idle gold in the country and put it into productive use since it has the potential to translate gold savings into economic investments.
