Budget Highlights 2014 : Effect on Personal Finances and Investments of Individual Investors
Budget highlights for the year 2014 are from the budget presented by Mr Arun Jaitely, Finance Minister of India on 10 July 2014. The most important tax relief given is raising income tax exemption limit from existing 2 lacks to 2.5 lacks. For senior citizens the exemption limit in tax is now raised to 3 lack rupees. Another important budget highlights is increase in 80C exemption limit from 1 lack to 1.5 lack rupees. There is a 50000 increase in the exemption limit under 80C.
Major Budget highlights effecting individual investments
The first major budget highlights is raising of Income tax exemption limit from present 2,00,000 to 2,50,000. An Increase of 50,000 rupees. Individual tax payers in the lowest tax bracket will save 5000 rupees. Tax payers in 20% tax bracket will save 10,000 where as tax payers in 30% bracket will save 15000 due to this raise in limit.
For senior citizens the tax exemption limit is increased from 2.5 lacks to 3.0 lakhs. The hike in tax exemption is in line with the exemption to other individual taxpayers. No additional benefit is provided in the budget.
Section 80C investment limit raised from Rs 1 lakh to Rs 1.5 lakh for tax benefits. Savings instruments such as Principal amount of housing loan repayment, ELSS investments in mutual funds, FD with a tenure of 5 years and above, provident funds (PFs) and life insurance policy premiums are some investment vehicles that qualify for tax exemption under Section 80C of the Income Tax Act. This is expected to increase the savings rate which has come down drastically in recent years.
Tax exemption on interest component on housing loan raised from Rs 1.5 lakhs to Rs 2 lakhs which will encourage purchasing of house.
Annual Public Provident Fund PPF ceiling to be enhanced from Rs 1 lakh to to Rs 1.5 lakhs. PPF account is opened for a tenure of 15 years but can be extended in slots of 5 years. Interest and Principal part are exempt from tax.
A special small saving scheme will be introduced encourage savings towards education & marriage of girl child.
Kisan Vikas Patra to be reintroduced for planned and unplanned savings under small savings schemes which will further enhance the savings rate.
Another major budget highlights for individual investors is, proposal to introduce single Demat account for all types of financial transactions.
It is also proposed by finance minister to introduce single KYC across financial sector and proposed inter usable KYC Norms.
EPFO (Employee Provident Fund Organization) to launch unified account scheme to ensure Provident Fund portability.
Cheaper Housing Loan & Tax Incentive for LIG – Low Income Groups.
Insurance sector FDI to be hiked to 49%, from 26% leading to increase in Insurance penetration.
Long Term Capital Gain tax on Debt Mutual Funds increased from 10 % to 20% and tenure increased from 12 to 36 months.
Also check this income tax calculator for AY 2014-15 to calculate your taxes including calculation of House Rent Allowance. Income tax calculator for 2015-16 AY will be updated after more clarity on budget proposals and approving of the budget by parliament.