This was the second Budget by finance minister Nirmala Sitharaman. It is a balanced budget considering the challenging times we are going through. Expectations were high in terms of boosting growth by putting more money in the hands of the end user. To that extent the man on the street is disappointed.
Having direct impact on the personal finance front is the rejig of the tax slabs as an alternate to the existing income tax rates and slabs.
The new tax rates and slabs look attractive but come with the caveat of no deductions and waivers. Therefore, exemptions under Sections 80C and 80D will not be applicable under this calculation.
Do your calculation first
We suggest that you do the calculation of tax payable for FY 2020-21, based on your expected income for the year, in April 2020 itself. Choose the method which allows you to pay lower income tax. If the latter is the one for you, then you need not block your money in investments eligible under Section 80C.
Another additional work for the individual taxpayer is the dividends received on investments. Till now the Dividend Distribution Tax (DDT) was deducted by the company or mutual fund house and then the balance was distributed to the investors. Now the DDT is abolished.
Hence the dividend received in the hands of the investor becomes taxable. This will be added to the income of the year and relevant tax as per slab must be paid by the investor.
Deposit insurance
The DICGC (Deposit Insurance and Credit Guarantee Corporation) cover of up to Rs 1 lakh of deposits in the bank in the event of a bank failure has been increased to Rs 5 lakh. This covers all SB accounts, RDs and FDs. This is an excellent move to protect the money of the general public. It is to be noted here that the depositors do not pay any premium for this cover. However, DICGC (a subsidiary of the RBI) charges a nominal premium from the banks.
Affordable housing loan
Under the affordable housing loan benefits, the additional Rs 1.5 lakh benefit has been extended to end of March 2021. But the new tax rate option does away with the deductions and concessions of Sections 80C and 24B. Hence the incentive of availing home loans is further reduced. The struggling real estate sector was hopeful of concessions in the capital gains rate and incentive for the end user to avail of home loans.
That sadly has not happened. The slump in the real estate markets would likely continue for some more time. That said, the Rs 103 lakh crore infra projects launched besides providing about Rs 1.70 lakh crore for transport infrastructure and accelerating highways construction will be a boost to the infrastructure of the country as well as create jobs.
In order to be able to claim status as an NRI, now an Indian has to stay abroad for 240 days instead of the earlier 182 days. Additionally, for an NRI who is not a resident in any country and maintains his status as an NRI by just travelling abroad, will be considered a resident of India and his global income will be taxed here in India.
This will not affect NRIs working abroad and paying taxes as per the resident country’s taxation rules. This will bring some errant Indians who have found loopholes in the tax laws and are avoiding paying taxes here in India by claiming NRI status.
The common man should therefore look at creating a well thought-out plan. Keep the cash flows in mind, avail of the best income tax structure for the family, save the surplus for all future needs and most importantly, nourish and feed the nest egg for a comfortable, healthy and enjoyable retired life.
