After having crashed headlong with Mamta Di on the railway budget, the government has committed a Kolaveri Di with the nation. It has dashed hopes of taxpayers and signed off it’s last attempt to recover from a reeling economy with a disappointing attempt.
I personally think, the budget was presented because it was meant to be presented. Total Kolaveri Di !
While the Union Budget 2012-13 for India is out, the new Direct Tax Code (DTC) is nowhere being talked about. I think Pranab dada has left a majority of the anxious investor disappointed. !
Though the new direct tax code (DTC) was supposed to come into force from 1st of April 2011, it was pushed out to an implementation date of 1st April, 2012. But where is it ?
New Income Tax Slabs
Union Budget 2012-13 has marginally made investors happy. The basic exemption income tax limit has been raised from Rs 1.8 lakh to Rs 2 lakh. The DTC was meant to revamp the income tax slabs but that did not get a mention at all.
Here are the income tax slabs :
| Income Tax Slabs | ||
|---|---|---|
| Tax Slabs (in Rs) | Income tax | |
| New Slabs | 0 to 2,00,000 | NIL |
| 2,00,001 to 5,00,000 | 10% | |
| 5,00,001 to 10,00,000 | 20% | |
| Above 10,00,000 | 30% | |
Union Budget 2012-13 – Other highlights
- Economy to grow at 7.6% in 2012-2013.
- A change in IPO guidelines will be brought in to promote small town participation which is lacking at present.
- Big cars, refrigerators, ACs will be more expensive.
- Savings accounts will now get Rs 10,000 tax deduction for interest earned.
- If your annual income is less than Rs 10 lakh and you invest in a new yet to be introduced equity saving scheme (named after Rajiv Gandhi), then income tax deduction of 50% will be allowed on investments upto Rs 50,000.
- The Securities Transaction Tax (STT) is reduced by 20% on delivery transactions from 0.125% to 0.10%. STT is payable when you buy or sell a share and gets added to the price during the transaction.
- Corporate tax rates are not changed.
- Gold will cost more as customs on gold goes up.
- Service tax rate has been increased to 12% from the present 10%.
- Senior citizens to be exempt from advance tax payments.
- Tax exemption of up to Rs 5,000 for health insurance for annual preventive health checkup.
Next stop – the IPL !
EPF percentage reduced, service tax increased, gold more expensive and the tax slabs change is like an “ehsaan” on the nation. And no signs of DTC!
Why this kolaveri kolaveri kolaveri di? !!!
@Vivek,
Reduction on EPF was not warranted for. I think 9.5% was a good. Why the common mass has to suffer.
@Rakesh, The answer is in your question .. because we are “common”.
I read housing society charges goes down. What does it mean?
@Vivek,
Is this the maintenance charges that we pay every month? not sure how these both could be related.
@Rakesh, I think it is something else, how can budget impact maintenance charges?
Lifeline needed – Expert advise from Radhey?
@Radhey,
My vote goes to very disappointing. I was expecting a lot more.
Anyways this Govt. is not going to come in power again.
@Rakesh, It might, there is no suitable replacement and they are good with allies, always listen to them. 🙂
My vote goes to “just OK”.
Even though no joy for salaried people, rural sectors should be benefitting. For us better luck next time!
@Vivek,
Rural sector has always benefited in the budget but wonder whether the actual money reaches them. There are so many middle-men in the center to eat the pie.
@Rakesh, That’s why some 50 Aadhar pilot projects are being launched. The money will straight go into the person’s account. If successful it’d become an excellent move.
@Vivek,
Yes, i did read about Aadhar projects but again if these maintained by the same people who managed UID then nothing is going to happen. They too are corrupt.
@Rakesh, As far as I understand Aadhar project will move money directly from government account to person’s account. So, if it is automated tracking of funds is easy, transaction becomes transparent and chances of misuse of money is reduced.
@Vivek,
Well if the money moves directly to the person’s account then there should be no misuse of funds.
@Rakesh, Exactly! That’s why when you apply for Aadhar id either you give them your existing account number [nationalized only] or they will ask to open a new one.
@Vivek,
When they were doing the UID there was a column for Aadhar information but they said just ignore that.
@Rakesh, There is a separate column to fill in your account details.
@Vivek,
Yes that’s what i was saying, there is a separate column for Aadhar information but they said to just ignore the same.
@Rakesh, I think I know why they said leave it blank. If you leave it blank it means you are telling you don’t have any existing account to be linked. Then you are forced to open a new account, which is probably an indirect way of getting business especially in post offices.
@Vivek,
Could be, not sure why they had that information in the form itself when they asked us to leave it blank.
@Rakesh, I don’t see any other reason because I filled my SBI account number in that.
“What is expensive”
ACs
Gold jewellery
Refrigerator
Luxury cars
Air travel
Telephone bills
Sport Utility Vehicles
Cigarettes
Handrolled beedis
Platinum jewellery
Diamond jewellery
Emerald
Ruby
Branded retail garments
Eating out at restaurants
Hotel accommodation
Hiring a law firm
“What is cheaper”
Cinema and films
LCDs and LEDs
Imported bicycles
Housing society charges
LPG
Mobile phones
School education
Iron ore equipment
Medicines for treating cancer and HIV
Processed food
Iodised salt
Match boxes
Soya products
Solar power lamps
LED bulbs
Natural gas
Uranium for generation of electricity
@Vivek,
Thanks for the summarizing, why processed food is cheaper?
School education is these government based or private? I know some school charges over Rs. 1 lakh as fees.
@Rakesh, I think processed food is cheaper due to some duty/tax removal.
The school fee must be for government schools, I don’t think private schools get any benefit from government.
P.S. I have not summarised it, it is courtesy TOI 🙂
“What is expensive”
Cinema and films
LCDs and LEDs
Imported bicycles
Housing society charges
LPG
Mobile phones
School education
Iron ore equipment
Medicines for treating cancer and HIV
Processed food
Iodised salt
Match boxes
Soya products
Solar power lamps
LED bulbs
Natural gas
Uranium for generation of electricity
@Vivek,
Here’s what is expensive,
ACs
Gold jewellery
Refrigerator
Luxury cars
Air travel
Telephone bills
Sport Utility Vehicles
Cigarettes
Handrolled beedis
Platinum jewellery
Diamond jewellery
Emerald
Ruby
Branded retail garments
Eating out at restaurants
Hotel accommodation
Hiring a law firm
@Rakesh, O yea, my bad I think I pasted cheaper things twice under different headings. Thanks for correcting it Rakesh.
@Radhey,
Thanks for validation check on voting, now i can vote only once.
This way we will get accurate results.
@Radhey, Did you do anything to fix it Radhey?
@Radhey,
The validation check on voting is for that day only. I could vote again today, however it allowed me to vote only once. So if i come back tomorrow i may be able to vote once again.
@Rakesh, haha this is hilarious. I think you should stop voting multiple times, it seems to be happening only with you.
@Vivek,
Yes, i guess, not sure about other readers. I just wanted that the results come up accurate so that we can come to know people’s view.
From next poll i will just vote once and forget.
@Rakesh, I cant fix it beyond this, I have blocked via IP and cookies so better don’t vote 2nd time.
@Radhey,
No problem Radhey, I won’t vote twice but i am only concerned about other users. They too should not vote twice or else we won’t be able to determine the correct results.
Thanks anyways…….
@Radhey Sharma, I think this is good enough Radhey, definitely not a problem with all users, might be with a few selective one. We can live with that. 🙂
I am happy with the budget :), LOL surprised why, because nothing better I expected from this government. Experience !!!!!!
I am just kidding. Rajiv Gandhi equity savings scheme (awating detail) seems little interesting, but why it’s based on annual income.
@Chirag,
Thanks for sharing your views, liked when you mentioned “Nothing better i expected from this government”.
Read about Rajiv Gandhi Eq. savings scheme let them come up with a clear picturee, at least it should be attractive like other tax saving instruments.
@Chirag, haha good one Chirag! So, you had zero expectations and you still got something good out of it. Good way to look at it, anyways no point in cribbing and just be happy with whatever you got.
As expected DTC has been postponed, lets continue to invest in ELSS and reap the benefits for one more year.
@Rakesh, Exactly, that’s what first thing came in my mind, ELSS is still ON :).
@Chirag, Not for me, my 80C got no room for it 🙁 but others surely can.
@Vivek,
Even i was going to invest more in PPF but with DTC gone i will shift the money to ELSS.
@Rakesh, I will continue my SIPs 🙂 or may increase after I am done with my analysis and tracking of current funds.
@Chirag,
Thanks for sharing your views, even though EPF, PPF & term plans cover most of my 80C requirements i will put in some more money in ELSS to earn more returns.
@Rakesh, My current employer doesn’t have option for EPF, so I am enjoying it with ELSS ;).
@Chirag,
Oh no EPF, that’s strange. Investment in ELSS will always beat EPF in the long run.
@Rakesh, yeah it’s really strange.
@Chirag, Isn’t it mandatory for all employers? Did you check with HR?
@Vivek,
The EPF rule states that It is mandatory for an employer to provide EPF if it has over 20 employees.
@Chirag, Time for you to sue your company Chirag and plan your retirement 😉 .. LOL!
@Vivek K, Guys I already had discussion before I decided to join the company and I was happy with it :). I (including my colleagues) also don’t have any complains. Ya I had to close my earlier EPF account (as no benefit from inactive account) and put the amount at right place :).
Normally company takes a signed agreement from each employee when they join, so they are at safer side :). EPF rule is always there, I know few people who sued their employer and later they started getting EPF :). It really happened. In my case, we (at least my team) are happy.
@Chirag, Yea some people are happy with cash in hand than putting in PF.
@Rakesh, EPF and insurance eats it all for me so doesn’t make a difference to me anyways.
@Chirag,
If you guys are happy with that then no issues. I too had employers in the past who did not contribute to EPF.
@Chirag,
You mentioned that you closed your old EPF account due to no benefit, don’t we continue to earn interest on it? Moreover if you encash EPF within 5 years it is taxable.
@Vivek,
Same here too, In the past whenever i used to change jobs i always used to encash my EPF, never trusted these guys.
Value research have already written an article on Rajiv Gandhi Eq. savings scheme.
http://www.valueresearchonline.com/story/h2_storyview.asp?str=101425
@Rakesh, I don’t like this: –
“The scheme would allow for income tax deduction of 50 per cent to new retail investors, who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 10 lakh.”
@Vivek,
Yes, even i was wondering whey they kept the limit. If you are encouraging people to invest in equity give 100% benefits and make it applicable for all the tax slabs.
@Rakesh, 50,000 limit is still ok but don’t understand the reason behind limit of annual income below 10 lakh.
@Vivek,
Exactly, they should remove the slab limit and make it applicable to all. If people want to invest and take benefit they will. Leave it to the people.
@Vivek,
There is another catch, it mentions that this will be applicable to only first time investors. Does that mean that people who have Demat A/c won’t get any benefit?
@Rakesh, Good question. We need another life line – expert advise from Radhey?
@Vivek K, I am not sure guys did anyone find out yet ?
@Radhey,
I couldn’t get it either as this scheme is relatively new once its launched we may get more information.
@Radhey Sharma, Not yet Radhey, if you find something please let us know.
@Rakesh, And people with high income would be willing to take more risk and invest in equity.
@Vivek,
Yes this is good but then equity is for long term and Indian investors do not realize that. They look at it as a quick way to make money.
@Rakesh, That’s a separate issue and need to be dealt in a different way. But such schemes would at least encourage people to invest in equities.
@Vivek,
Yes that will but then we already had ELSS. Why introduce a new scheme just continue with the existing ones.
@Rakesh, Correct but ELSS fate is dicey under DTC so government is giving an alternate. May be this scheme will be promoted under DTC as revenues might be going to governments kitty.
@Vivek,
I think its an excellent move by the Govt. They are giving 50% discount but at the same time will collect more money through STT.
@Rakesh, But they have also reduced STT percentage, so not too bad after all.
@Vivek,
Yes reduction in STT will benefit only traders who invest heavily in stock market.
@Rakesh, You are right, occasional traders won’t even know something like STT exist. 🙂
@Vivek,
Yes, there are so many charges when you buy/sell a stock. I have stopped looking at the contract note long time back.
With service tax increased from 10% to 12% eating out will be more costly, travel and leisure activity will cost more too which in turn burn a hole in common man’s pocket. This may lead to rise in inflation.
@Rakesh, I don’t think eating out and leisure activities belong to common man. This is for people with good incomes. Common man is someone who is living hand to mouth even for basic necessities of life.
People end up spending a lot on unnecessary eating out and leisure activities, so this is a blessing in disguise for their health and financial planning ;).
@Vivek,
Agree with you by common man i meant people in the income between 5 lakhs – 10 lakhs from the middle -class family who like to go out and enjoy on weekends with their family. I think they deserve better than this.
@Vivek,
Who would not want to take his wife & kids out once in 15 days and have a good time. With increase in service tax they will have to shell out more.
@Rakesh, In that case I don’t think 2% is going to make much difference. On a bill of 1000 Rs, earlier ST was 100 Rs and now it will be 120 Rs.
20 Rs more for enjoyment is manageable I feel.
@Vivek,
Yes, agree that Rs. 20 is not a big deal but then they should lhave ooked at other avenues to tax.
@Vivek,
But then this service tax will also be applicable to the life insurance and health insurance premiums, right. We pay ST for that too.
@Rakesh, Yea that’s probably a downside, comes as part of the parcel.
@Vivek,
So in a nut-shell the government increases the Income Tax slab rates and then recovers the money through ST. So in all no benefit to people.
@Rakesh, hahaha, you have got the secret ingredient of budget out now 😉
It is only supposed to “look” good!
@Rakesh, As far as enjoyment is concerned movies are cheaper so that’s another avenue and some compensation there. Also, TV are cheaper too, another source of entertainment.
I think it is fine to collect slightly more ST if fiscal deficit figures are to be believed. There is no other way to save the economy.
@Vivek,
Increase in service tax will make the government richer by 18,000 crores, now that’s a lot of money. Hope they will make proper use of it.
@Rakesh, The schemes will definitely be launched to utilize that extra money [e.g. towards agriculture and defense] but how is it implemented is a big question?
@Vivek,
Agree with you, how they implement we will have to see. Even if they utilize half the money collected then it will be good.
I don’t think the FM had much choices in the current budget. He had a herculean task to reduce to fiscal deficit. With limited options he had, I think he did the best he could.
There were a couple of more aspects which affects personal finance aspect and I have written in my article at http://insight.banyanfa.com/?p=546.
Regards
BFA
@Banyan Financial Advisors, Agree, that’s why I say it was OK budget. Nothing great but not too bad either.
@Banyan Financial Advisors, I really like your budget insights BFA. You have tried to highlight the points that will affect the common man’s day to day life. Also, you have displayed the positives of the budget, which is what we need to look at.
Good one! thanks for sharing.
@BFA,
Good one, liked the way you put it. Keep up the good work.
@Banyan Financial Advisors,
You got a nice blog, continue to spread the good work and educate people.
@Rakesh,
Thanks Rakesh. I appreciate your comment.
@Banyan Financial Advisors, A name would have been better rather than dealing with BFA.
@Vivek K,
Hi Vivek,
What is your contact email id ? I can email you directly.
Regards
BFA
@Banyan Financial Advisors, You can find my email id on your blog where I left my comment.
@Radhey / @Vivek,
Read this somewhere, Home Owners can claim upto Rs 5,000 for yearly maintenance. I was not aware about this, how do we go about claiming it.
@Rakesh, I haven’t heard about this. But if it is there I think it can be claimed just as house rent exemption by producing receipts. Radhey can confirm?
@Vivek,
Same here, i too did not hear about it and infact it has been there for years. Last year the cap was Rs. 3000.
@Rakesh, Oh, so we paid some 900 Rs extra to government all these years 🙂
@Vivek,
Yes we did, i am not sure that this existed and how we could claim the same.
@Rakesh, Can you share the link or something where you found this information?
@Vivek,
Here it is…
http://in.reuters.com/article/2012/03/16/india-budget-2012-new-tax-income-dtc-idINDEE82F05Q20120316
@Rakesh, hmmmm this is good but do you know under which section we can claim this exemption?
@Vivek,
Even i was searching to get that information. I hope its not part of 80C though.
@Vivek,
Could not get more information, even looked at my last years Form 16 but no luck.
@Radhey, Radhey, could you kindly assist? How to claim the benefit of apartment maintenance charges?
@Vivek K, I need to check on this but I suspect I know the answer so give me sometime.
@Rakesh, Hope not like preventive health check-up under 80D, won’t be of any use in that case.
Medical Insurance – Senior citizen age reduced from 65 yrs to 60 yrs
In the last budget the age for senior citizen was reduced from 65 yrs to 60 yrs, but it was not applicable for sec 80D and 80DDB. Till now people above 65 yrs old were considered as senior citizens in case of medical insurance deduction, but in this budget, that rule is amended and anyone above 60 yrs will be considered as senior citizen. Infact now for all the taxation purposes, senior citizen age is above 60 yrs. In case of Sec 80DDB , the deduction up to Rs. 40,000/- for the medical treatment of a specified disease or ailment is allowed.
I think this is a welcome move and will benefit a lot of people.
@Rakesh, This is indeed a welcome move. I was looking for some good news for senior citizens in this budget. Thanks for sharing the news.
@Vivek,
Yes, this is one good thing what i liked. It will benefit a lot of people whose parents are in the age of 60’s. Medical insurance is a very costly affair these days.
@Rakesh, Correct and also 5000 Rs for preventive medical check-up is also exempted. This is for everyone and not just senior citizens.
@Vivek,
Yes that’s good this will encourage people to do annual check-ups. But then this Rs. 5000 is also included in the limit of Rs. 15,000 that we have and its not any additional benefits.
@Rakesh, No, I think it is on top of 15000, will have to cross check I guess?
@Vivek,
Its part of Rs.15,000 no additional benefit. Here is the link –
http://www.livemint.com/2012/03/16225522/Preventive-healthcare-offers-R.html
@Rakesh, Another disappointment then! 🙁
@Vivek,
Yes, more drawbacks then benefits i guess.
@Vivek K, I don’t see any benefit with this move, medical premium are already so high.
@Vivek,
I see it this way, suppose i pay 10k as medical premium each year and claim benefit. From next year i can go for regular annual check-ups and include that amount too. Wonder how much tax would that save?
@Rakesh, For highest bracket you should be saving 1500 Rs [30% of 5000].
@Vivek,
Thanks, so it makes sense to get an annual check-up.
The Budget also exempt up to Rs 10,000 of interest in savings account.
This will help people who park a lot of money in savings account.
@Rakesh, How many people declare it anyways?
@Vivek,
That’s right, i have only declared it once.
@Rakesh, I think that’s why this has been introduced so that people are encouraged to declare it.
@Vivek,
Yes it will encourage people to declare but i did not understand the concept. People will always declare the interest less than 10,000, no one would want to pay additional tax.
@Rakesh, Yea but some might be having interest of 11k or 12k so they might declare to avoid headaches just for 1-2k. Who wants IT folks knocking on their door?
You never there could be other reasons as well but I think it is a welcome move, at least for me because I declare it every year.
@Vivek,
Yes, you are right the fear of being caught will encourage people to declare the interest every year.
@Rakesh, I think this move came as part of correction. Last year govt has declared that people who have income only from salary up to Rs 5 lakh, don’t have to (necessarily) file income tax returns. Now if a person has even little income from savings back account and salary less than 5 lakh, then he has to file ITR. In that case there was no use of the move and very very few can exclude them filing ITR. This move will correct it.
However, people earning little from savings account interest hardly declare it. I feel 90% of people don’t even know that they have to declare interest :). Many even don’t check their account that how much interset they got (obviously before interest rate war and Kotak Mahindra ad started). So anyway very less people used to declare it and govt would have got very little tax on interest. This move will spread the awareness too 😉 and people will start declaring.
@Chirag,
Thanks for the detailed explanation. I think most of the people are not aware of it, some don’t want to declare due to fear of paying more taxes, I used to be one of them :(. But now with the limit upto 10k i can easily declare.
@Chirag, Ah this makes sense Chirag. Thanks for connecting the dots and hope awareness is spread.
Vow – really impressed with the way you guys are discussing this. Do you guys have the laptop beside your beds ?
Keep up the great work.
I have read through all the questions you have asked, we must wait for all the inferences to be out by the income tax experts before we can conclude anything.
So as and when you folks get something more, jeep updating here. I will also do the same.
@Radhey,
With everyone pitching with their views we all are getting very good information. Knowledge is gained when it is shared.
@Rakesh, Well said, totally agree.
@Radhey Sharma, Thanks Radhey, topics like budget tends to attract a lot of views. You keep hearing new things almost every day so it keeps the discussion interesting.
You should join in as well. 🙂
@Vivek,
Yes totally agree. A lot of points have been discussed so far, very good discussion going on, gaining knowledge.
@Radhey Sharma, Sharing and gaining is becoming more interesting here, so we are ON. Rakesh and Vivek are really rocking !!!!!!!! They are heros here :).
@Chirag,
Thanks, you too are contributing. Hopefully many more members will start contributing slowly.
@Chirag, Heroes? haha .. thanks Chirag!
This has helped me avoid the idiot box.
Tax benefit on infrastructure bond has been taken off.
This is also disappointing, additional benefit of 20k is gone. Why would they want to do it? For India to grow we need very good infrastructure. What signal the Government is sending out?
@Rakesh, This has been compensated by launching more tax free bonds. Government seems to be having different plans for infrastructure.
@Vivek,
But then will we be able to claim additional benefits or it will be part of 80C. Hope this is not Rajiv Gandhi tax saver scheme.
@Rakesh, Tax free bonds don’t come under any section. The government controls the amount of such bonds to be issued. With the increase in the limit retail investors can purchase and enjoy the returns [8-9%] without any tax. They are generally locked for 5 or 10 years.
I myself purchased bonds of PFC this year.
@Vivek,
Yes, I am aware of these bonds but then we can’t claim any deductions towards tax. Incase of Infrastructure bonds we could have claimed 20k.
@Rakesh, By claiming 20k, you are saving 6k tax [assuming 30% tax slab]. With tax free bonds you can invest more and earn more interest without paying any tax. I think it is a better deal.
Moreover the 80CCF infra bonds are useful only for highest tax bracket people and not for others whereas tax free bonds are useful for everyone.
@Vivek,
I don’t think Govt. tax free bonds are eligible for income tax exemption. 80CCF used to be but they have taken out.
@Rakesh, No they are not eligible for any tax exemption. But you don’t have to pay any tax on the interest earned on these bonds, its free money just like MFs/Stocks after one year.
@Vivek,
Yes, thanks for clarification. 8.5 -9% is not bad in these bonds and lot of people would invest. But i was disappointed by removing the 80CCF exemption. They should have kept that too.
@Vivek K, You get some, you lose some. 🙂
EFP interest rates comes down from 9.5% to 8.25%.
This was not a part of the current budget, EPF authorities declared it a day before. This again is dampening. There is enough surplus lying in the EPF A/c, as well they could share it with the people.
But Government thinks otherwise. 8.25% will be in par or just about manage to beat inflation in the long run.
@Rakesh, This was done to set the context of budget 😉
I think this is revised every year and when economy booms it will go up.
@Vivek,
Yes, EPF rates are revised every year but they themselves said that there is a lot of surplus lying in their account. Why not share with the people?
@Rakesh, I am sure there must be a good reason for doing it, just that we don’t see it.
The economy cannot sustain with money flowing at one side only.
I am keen to hear more from people who have voted “it was awesome”.
@Vivek,
Same here, it will make the discussion more interesting.
@Rakesh, Or people might have put a sarcastic vote 🙂
@Vivek,
Or people like me voting multiple times, though i voted for disappointed.
@Rakesh, I doubt anyone else would have done that otherwise someone might have reported.
Finally something to cheer, NSC and PPF rates to go up.
http://timesofindia.indiatimes.com/business/india-business/Small-savings-set-to-fetch-higher-returns/articleshow/12347310.cms
ULIPS set to be more expensive…….
Service tax on the first year premium would increase from 1.5% to 3% of the gross premium.
Under the revised norms, applicable from April 1, 2012, the portion of premium that is invested in equities and do not constitute risk cover for mortality will attract service tax.