The Budget and us

So, what’s in it for us, now that the finance minister Arun Jaitley has delivered the budget? Expectations were built up that the minister will increase the minimum tax deductible slab from Rs 2.50 lakh, but no such thing was done. Instead the finance minister has given the salaried person a number of deductions and exemptions to save taxes. In his own words the finance minister has said that personal tax benefits to the extent of Rs 4.44 lakh has been provided through various exemptions.
Before we look at the break-up and benefits of the deductions and exemptions its worth understanding the motive behind these by the finance minister. Through various deductions and exemptions the finance minister has ensured that we save more in long term instruments. He and the country in turn benefits by getting an increased corpus of long term money which can be used for investment in long term payback infrastructure projects.  


Having cleared what’s in it for the finance minister, let’s now take a look at how we can save paying Rs 444,200 per annum in taxes.

• Rs 150,000 through deduction under section 80C, 80CCC: Investments made in the Sukanya Samriddhi Scheme will be eligible for deduction under section 80C of the Income Tax Act. Further, interest accruing on deposits in such accounts will be exempt from income tax. The withdrawal from the scheme in accordance with the rules will also be tax exempt. This deduction under section 80C is amended to provide for deposits during the year by the parent or legal guardian in the name of any girl child of the individual parent or guardian. These amendments will take effect retrospectively from April 1, 2014. So here we can take advantage of the scheme for the current year itself.
• Rs 50,000 through deduction under section 80CCD: In order to encourage savings in long term pension funds, finance minister has given an additional deduction for contributions to New Pension Scheme up to an amount of Rs 50,000. The earlier deduction of Rs 100,000 has been increased to Rs 150,000 in the proposed budget.
• Rs 200,000 through deduction under section 24B: This provision existed earlier with a limit of Rs 150,000 this has now been increased to Rs 200,000. Interest paid on housing loans of up to Rs 200,000 will be available for deduction.  
• Rs 25,000 through deduction under section 80D: Deductions under section 80D in relation to health insurance premium has been increased from Rs 15,000 to Rs 25,000. Further, deduction has been enhanced for senior citizens from Rs 20,000 to Rs 30,000. Moreover, every senior citizen above the age of 80 years who is not covered by health insurance will be allowed deduction of Rs 30,000 towards medical expenditure.
• Rs 19,200 through exemption under section 10: Transport allowance exemption is being increased from Rs 800 to Rs 1,600 per month.

There is enough room in the budget to plan our finances in order to avoid paying higher tax and in turn building up on our savings for long term benefits.

And if you are in the mood to join the cleanliness drive then provisions have been given for giving 100 per cent deduction under section 80G for donations under Swachch Bharat and Clean Ganga Fund.

For the super-rich an addition surcharge of 2 per cent has been imposed but then the government has completely abolished wealth tax.

The budget does not leave any more money in the hand of the salaried person than it did before the budget but it gives them an option of building up on his savings. Further, for those who are paying housing loans there is more relief by way of a higher ceiling of Rs 200,000.

Further, medical insurance is being encouraged by increasing the limit. It is better to cover your risk by taking a medical insurance policy than paying taxes, and worse, in case of any adversity, paying for hospital expenses too.

In order to secure the future of your girl child the minister has thoughtfully increased the investment limit by Rs 50,000. Even if you invest Rs 50,000 every year for your daughter for ten years under an instrument that gives 10 per cent return every year the amount would build up to Rs 10.06 lakh on maturity. Something you daughter will be more than happy to take.