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Tanvi has been a full-time personal finance journalist and now leads a multi-faceted existence as a wife & mum, and now a Certified Financial Planner and wine sommelier.

Budget 2017: At A Glance

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Death, elections and a general set of jitters notwithstanding, the Union Budget for 2017-18 was finally presented this morning amid a mostly calm Parliament House – quite a rarity! Here’s the lowdown on the things that will affect you and me…

Personal Taxation

Yay you have reason to cheer!

  • Taxation slab for income from Rs 2.5 lakh to Rs 5 lakh reduced to 5% from 10% (halved)Effectively you will pay 50% lesser tax i.e. Rs 12,500 from the earlier Rs 25,000 (10% of 2,50,000)
  • If you earn upto Rs 4.5 lakhs, you could end up paying no tax at all! Let’s find out how
  • There is a rebate of Rs 2,500 extended to those with income upto Rs 3.5 lakh. Hence, the combined effect of both these measures will mean that you wouldn’t need to pay any tax if u earn upto Rs 3 lakhs p.a. and the tax liability will only be Rs 2,500 for people with income between Rs 3 and Rs 3.5 lakhs.
  • Over and above this if you take advantage of the limit U/S 80C i.e. invest Rs 1.5 lakh into tax saving instruments like PPF, Life insurance premium or ELSS, your exempt income goes up to Rs 4.5 lakh!
  • Hence you will end up paying tax only on Rs 50,000 @5% i.e. Rs2,500
  • Also, you will be entitled to fill a 1 page ITR if your income is below Rs 5 lakhs, which effectively makes life simpler, don’t you think
  • If you are earning upto Rs 50 lakhs your effective saving is Rs 12,500 (by way of 5% tax saving)
  • But if you are amongst the high flyer earning more than Rs 50 lakhs but less than Rs 1 crore, you will have to shell out a surcharge of 10% on the tax payable.
  • And if you earn more than Rs 1 crore, well then be prepared to pay out a surcharge of 15% on the tax payable
  • And if you delay in filing your tax returns, you will have to pay a penalty of Rs 10,000

Your investments

Into NPS – Your withdrawal upto 25% of the NPS (if you have made the contribution) is exempt from tax

Into Shares – If you have bought shares on or after October 1, 2004, these will not be considered for tax exemption if Security Transaction Tax has not been paid for them under section 10(38) on which STT is not paid (genuine cases to be notified and excluded);

Housing – Is back?

Although demonetisation clouded the prospects of the real estate industry, with prices coming off by about 15% to 20%, the budget has brought the focus back on this sector As a consumer, there is a lot going for you in the housing space post the budget announcements.

· Affordable housing will benefit by getting infrastructure status

o By getting this status builders will benefit from cheaper loans and easy access to credit. This eventually trickles down by way of lower prices to you as a consumer. Prices are expected to come down to that extent

o Also, the definition for affordable housing has been changed to include units that have a built up area of 30sq m to a carpet area of 30sq m, which means an additional 30% space. If you haven’t considered these houses yet, you probably can

· Capital gains on sale of your property to come down

o When you sell property you are supposed to take into account the inflated cost of acquisition and deduct this from the selling price

o Every year government comes out with cost inflation index, which is linked to inflation. This base year had been set at 1981 for years

o With the base year changing from 1981 to 2001. The cost of your acquisition will go up (as inflation has gone up) and your capital gains will come down, which means you pay lower tax

· Holding period to quality for Long Term Capital Gains Tax benefit has gone down

o As a seller earlier you were required to hold your real estate for 3 years to qualify for any Long Term Capital Gains Tax Benefit

o You can hold on for 2 years and get Long Term Capital Gains benefit. Which means you can sell your property little earlier and still be eligible for lower tax

· Increase in tax saving options, known as 54 EC Bonds

o As of now capital gains upto Rs 50 lakh arising by selling any of your property can be exempted from tax if you invest into 54 EC bonds

o As of now there are bonds offered by NHAI and REC

o An announcement has been made to increase the number of options under this

· Deduct TDS on the house rent that you pay – If you pay rent in excess of Rs 50,000 per month, you are required to deduct tax @5%

· Your rent deductions have been capped – Known as loss from house property

o If you have bought a house and it is not rented or say occupied by you, don’t worry. You will continue to get a deduction of Rs 2 lakh on the interest that you pay from your taxable income

o However, if you have bought property but have rented it out then then there is a loss for you

§ Earlier you could claim a deduction of 30% of the rental income along with the interest you paid on your housing loan, by setting if off against your salary

§ Now this set off has been restricted to Rs 2 lakhs only

Education

Our finance minister quoted Swami Vivekananda, “The education which does not help the common mass of people to equip themselves for the struggle for life ………… is it worth the name?”

Yes, it is now worth it. A few initiatives have been announced in this budget to better the educational system for us, the youth

  • An Innovation Fund for Secondary Education to be created – this will encourage local innovation
  • Government to launch SWAYAM platform with at least 350 online courses — to help students to virtually attend the courses taught by the best faculty and access high quality reading resources as well as take tests online
  • 100 India International Skills Centres to be established across the country – these

Centres would offer advanced training and also courses in foreign languages, helpful in finding jobs outside the country

  • Launch of the Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) at a cost of Rs 4,000 crores, to provide market relevant training to 3.5 crore youth

Start Ups – Not many changes

Can now avail a three year tax holiday in the first 7 years of their existence, out of the early 5 years of existence. This is good news considering start ups start making profits in latter years

Fiscal Deficit

The good news is that the ministry is set at restricting the fiscal deficit to 3.2% of the GDP this year

Thereafter this target has been set at 3%

You can embrace for a low borrowing, low interest rate and high growth scenario

No major changes in the excise and service tax rates have been announced ahead of the Goods and Service Tax (GST)

Mobile phones to get little expensive

The government has proposed to impose a 2% special additional duty (SAD) on imports of populated printed circuit boards (PCB) used for mobile phones

Tobacco of any sort to get more expensive

The excise duty on pan masala with tobacco has increased from 10% to 12%

While duty on cigarettes has gone up too

Certain processed foods to get expensive

Your roasted and some salted nuts will get expensive with an increase in custom duty from 30% to 45%

Disclaimer: The views and opinions expressed in this article are for informational purposes only. The authors and publishers are not responsible or liable in any manner for any actions you might take relying on the contents of this article.

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