It’s that time of the year again. When the Union Finance Minister reads a long document, that is virtually a plan of action for the whole economy. A document that is not easy to decipher yet triggers a range of emotions and a slew of debates.
As always, for you and me, the crucial question is “what is in it that will help me or harm me?”.
Before we get into the gist, here is a caveat. Does not matter which party is in power and who the finance minister is, your budget and your financial future is in your hands. Educate yourself to invest smartly, be alert to the swings of the economy’s wind vane and separate your heart from your head when you take financial decisions. If all that sounds too much, trust an experienced financial advisor to be your family’s money doctor. That will be a healthy decision, whether you consider yourself wealthy or not.
The budget in a nutshell
- Here is a new regime of lower taxes and zero rebates. If your income is below ₹7 lakhs per annum, you pay no tax. Most of us will be left with more money to invest the way we want to meet our personal financial targets. The highest surcharge rate on income tax has been cut from 37% to 25%, thus bringing the maximum tax rate of 42.74% down to 39%.
- If you are a senior citizen, smile! The maximum deposit limit in the Senior Citizens Savings Scheme (SCSS) has been doubled to ₹30 lakhs. Like many others, if you would rather save with the post office, the deposit limit for the Post Office Monthly Income Plan has been raised to ₹9 lakhs for a single account and ₹15 lakhs for a joint account.
- Women have been given a new small-savings scheme where ₹2 lakhs can be invested until March 31, 2025, for 7.5% annual interest.
- Did you buy residential properties or insurance policies mainly to save substantial tax? Well, there is bad news for you. The property price route has now been fenced at ₹10 crores. The insurance option now comes with a cap of ₹5 lakhs annual premium and all receipts will be added to the taxable income (except for death settlement).
- Were you among those who had started investing abroad in the recent years? If you remitted more than ₹7 lakh per year, 5% tax was collected at source. Budget 2023 has quadrupled this rate to 20% (unless the remittance is for education or medical purposes). You are likely to think twice before you send money abroad now, right? On the positive side, this move is likely to make the rupee stronger.
Another year, another budget
The budget runs into nearly 60 pages and we have hardly scratched the surface. It is great education to read all of it unless you would rather focus on earning and investing more, and leave all the scrutiny and analysis to your financial advisor.
Soon, it will be another year and another budget. What matters more to you is your life goals, and how well your money is helping you achieve those. Here are some tips to help you focus:
- It is very unlikely a government budget will change your goals. Nevertheless, please revisit those targets.
- Your asset allocation must have been arrived at after careful thought. Stick to those. Do not react to social media headings and make sudden changes. If in doubt, consult your financial advisor.
- Focus on the future and not the past. There are any number of what-if scenarios that can both confuse and mislead. There are no get-rich-quick shortcuts in the legal and ethical realm. But decisions based on a bad past (remember the Global Financial Crisis of 2008?) can result in get-poor-quick outcomes.
- Budget season or not, always use post-tax returns to compare investment options. Find the calculations too complex? Just as your family doctor does, trust your financial advisor to read your reports right and suggest the right prescription.
The budget will soon be old news. Here is hoping your personal budget will continue to guide your journey towards financial freedom.
Lovaii Navlakhi is the Founder and the CEO of IMMPL. He can be reached here.
Note: Money Tales of Lovaii with MintGenie is a series that helps investors make better sense of their money. Our aim is to help you make better saving and spending choices.
