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Budget 2014 Eases Taxes Marginally

What you really want to know about the budget: How it affects your taxes. So here goes:

Base Slab Upped by 50K to 250K

Your income upto Rs. 250,000 is exempt. (Earlier, Rs. 200,000).

If you’re above 60 years of age, the exempt limit is 300,000.

Above that, in a progressive manner:

  • 250K (or 300K) to 500K is 10%
  • 500K to 10 Lakh is 20%
  • 10 lakh plus is 30%

I.E. Nothing has changed. But this saves you about Rs. 5,000 in taxes from last year.

Housing Loan Interest Upped by 50K to 200K

Interest on your self-owned property gets an interest exemption of Rs. 200,000 per year. This was 150,000. Again, another unnecessary housing exemption (why don’t I get it for a car loan?) .

But that’s good for those of you who own houses and live in them. Rental houses can continue to deduct all interest, of course.

At the top bracket this saves you about Rs. 15,000.


80C Limit Hiked to 150K

The speech talked about your investment limits under section 80C hiked from Rs. 100K per year to Rs. 150K. We don’t know if this covers children’s education also.

If you’re in the top bracket, you save Rs. 15,000 more this way.

Our View: Okay, Better than we expected

We didn’t expect big tax changes. And we got some, however minor. So this is a good thing.

At the highest tax bracket you’ll save Rs. 20,000 at least. If you have a housing loan for owned property, you get another Rs. 15,000.

You basically get Rs. 1500 to Rs. 3000 per month extra to spend. Spend it wisely.

  • Murty says:

    Rupee comes , Rupee goes….. No change. Zero Sum Game.
    1. Rs.50000 is kept in your hand, and gave a choice to get it back. The Government lost nothing.
    2. Those who are paying EMIs know this. Earlier , the portion of EMI towards interest was beyond Rs.1.5 Lakhs, and whatever additional interest beyond this limit was just not accounted for in taxation. It actually used to be an opportunity loss. Now the limit is enhanced, you can show this to full extent but actually it is the banks who will get the maximum benefit.
    3. Section 80C already crossed Rs.1.5Lakhs. So, again, it is covering the current expenses and no additional benefit. If it is made Rs. 2 Lakhs, it would have been beneficial .
    The bottom line is that the Real Estate Lobby still strong enough to influence the Government.

  • Samarth says:

    Hi Deepak,
    I heard that now FMP will be treated the same way like FD for taxation.
    Is that true ? and is that retrospective?

  • ajay says:

    Dear Mr. Deepak,
    The TV channels are talking about 80CCD whereby you can additionally invest 100,000/- in NPS or Retirement Funds of Mutual funds (to be announced) and this amount is over and above 80C 1.5 Lac. You did not write about it. It is a big boost for retirement planning, if it is true.

    • ajay says:

      Dear Mr. Deepak,
      This is what I meant in previous comment. Now it seems it is seperate under 80ccd, 1Lac.
      The long-awaited parity between pension funds and mutual fund retirement plans is finally here. Tucked away in a corner of Arun Jaitley’s budget highlights is the innocuous sentence ‘Uniform tax treatment for pension fund and mutual fund linked retirement plan’. This means that mutual funds can now launch retirement plans of their schemes which will be treated the same way as pension funds, as far as taxation goes.
      While the fine print is still awaited in the form of actual notifications by SEBI and CBDT, the broad outline is clear. With this, AMCs are free to launch plans in which investors can make investments that will be free, just as NPS investments are. Just like NPS, These will be locked in till retirement age.
      This has the potential to solve the problem of investors’ retirement money not flowing into equities. Given the marketing failure of the NPS, mutual fund retirement plans could be the next best option to accomplish this goal.