Our finance minister Mr. Arun Jaitley presented the budget on 10-JULY-2014. Here is a quick note on some provisions from the budget 2014 that affect personal finance.
Some provisions of the budget 2014 that affect personal finance
- Basic income tax exemption on income tax increased from Rs. 2 Lakh to Rs. 2.5 Lakh. That means anyone in the country earning more than Rs. 2.5 lakhs has an additional Rs. 50000 to spend.
- Basic income tax exemption on income tax for senior citizens increased from Rs. 2.5 Lakh to Rs. 3 Lakh.
- Increased saving limit u/s 80C. Investment limit increased from Rs. 1 Lakh to Rs. 1.5 lakh. There was no guidance to add or delete any eligible product form the list. You can simply increase investment in any one of the existing 80C product to claim the benefit.
- The interest component of home loans allowed deduction u/s 24 B has been increased from Rs. 1.5 lakhs to Rs. 2 lakhs. Principle payment continues to be covered u/s 80c as earlier.
- Annual limit on PPF deposit has been increased from Rs. 1 lakh to Rs. 1.5 lakh. PPF investment as earlier continue to be eligible for deduction u/s 80C
- Kisan Vikas Patra (KVP) will be reintroduced after nearly 3 years under small savings scheme.
- There is a proposal to have single demat account for all types of financial transactions. More details are awaited and will be known in days to come. I am personally watching this proposal as it solves lots of investment issues for customers.
- There is a proposal to introduce a single Know Your customer (KYC) norms. This is again a very welcome move as customers were submitting ID and address proof while buying various financial products. I believe treatment will be similar to what we have for mutual funds right now. Currently once you are KYC verified you can buy mutual funds from any fund house without submitting KYC documents again.
- There are changes in Long Term Capital Gain (LTCG) treatment for debt mutual funds. Currently the tenure for LTCG treatment was 1 year this is now increased to 3 years. The rate of tax has also been increased from 10% to 20%. Debt mutual funds have definitely lost sheen this budget especially for people in income tax 10% or 20% tax slab. There are no changes to the indexation benefits for the purpose of capital gain computation.
- Last but not the least there was an announcement for a special small saving scheme for education and marriage of the girl child. More details are awaited on this.
PS: This blog is not a comprehensive summary of budget 2014. The purpose of this blog is to list down few key points that affect my clients.
Photo by 401(K) 2013