DSIJ Mindshare

Union Budget 2015 - What’s In It For You?

Touted as a ‘make or break’ budget for India, the Union Budget 2015 turned out to be a mixed bag. While the budget retained the focus on financial inclusion, infrastructure, education, health, agriculture, and curbing black money, it offered very little in terms of tax savings to individual tax payers. The finance minister has increased tax exemption limits for health insurance premium under Section 80 D for individuals and family from Rs 15,000 to Rs 25,000. For senior citizens, the limit has been increased from Rs 20,000 to Rs 30,000. In addition, for very senior citizens i.e. those above the age of 80, the budget has announced tax exemption up to Rs 30,000 on medical treatment for self.

Investment in the Sukanya Samriddhi Scheme will be eligible for deduction under Section 80 C. Besides, any payment from the scheme will not be taxed. This is a significant step in the direction of providing higher education to the girl child. Transport allowance, which is granted to an employee to cover expenses for commuting between residence and the place of work, has been increased to Rs 1,600 per month from Rs 800. There were expectations for this allowance to be increased to Rs 2,500 per month. In addition, wealth tax of 1 per cent on the net taxable wealth of the assessee that exceeds the limit of Rs 30 lakhs has been abolished. Instead, those with a taxable income of more than Rs 1 crore will have to pay an additional surcharge of 2 per cent. The widely expected increase in the minimum taxable limit, exemption under limits of 80 C, and interest on housing loans did not come through.

If you are a mutual fund investor, there are a few provisions that will impact your investments. On the positive side, if a mutual fund decides to either merge a scheme wherein you have invested your money into another scheme of the same mutual fund or the scheme gets merged with another scheme on account of takeover, you will not be required to pay any capital gains tax now. This has been a long standing demand of the mutual fund industry and the Union Budget 2015 has removed this anomaly which compelled investors to pay capital gains tax if any such action was initiated by a mutual fund.

On the negative side, the budget proposes to increase the surcharge on dividend distribution tax (DDT) paid by the debt funds before paying dividend to you. The surcharge has been increased to 12 per cent from 10 per cent. As a result, the DDT applicable to individual investors will now be 28.84 per cent, as against the current level of 28.352 per cent. The increase in service tax from 12.36 per cent to 14 per cent will result in practically all the services becoming costlier for you. In other words, eating out, air travel, telephone bills, cab services, staying in hotels, debit and credit card-related services, courier service, and a number of other facilities that require availing of services from another party will cost you more.

A major positive of the budget is an announcement of a proposal to work towards creating a universal social security system for all Indians, especially for the poor and the under-privileged. The government will soon launch Pradhan Mantri Suraksha Bima Yojana that will provide accident insurance cover of Rs 2 lakhs for an annual premium of Rs 12. The government will also launch Atal Pension Yojana, which will provide a defined pension, depending on the contribution and its period. To encourage people to join this scheme, the government will contribute 50 per cent of the beneficiaries’ premium limited to Rs 1,000 for five years in the new account opened before December 31, 2015.

In addition, for those in the age group of 18 to 50 years, Pradhan Mantri Jeeven Jyoti Bima Yojana will cover both natural and accidental death risk of Rs 2 lakhs for an annual premium of Rs 330. Besides, the employees will now have the flexibility of either opting for EPF or NPS. For employees below a certain threshold of monthly income, contributions to EPF will be optional, without affecting the employer’s contribution.

The Gold Monetization Scheme announced in the budget will allow depositors to earn interest in their metal accounts. Besides, the launch of a Sovereign Gold Bond, which will offer a fixed rate of interest and will be redeemable in cash, has been announced. However, there are certain key factors that will determine the success of these initiatives such as rate of interest, minimum investment amount as well as mechanism to assess the value of jewellery. As is evident, the Union Budget 2015 is a mixed bag of hits and misses. However, it certainly has the potential to pave the way for economic growth that will benefit one and all.

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