Union budget 2014 presented by Honourable Finance Minister Mr. Arun Jaitley brings lot of changes that will impact individual personal finance ranging from savings, investments, taxation.
Here are the key announcements from Budget 2014 and its impact on your personal finance:
Personal Income tax
- Exemption Limit: Personal Income-tax exemption limit raised by Rs 50,000 i.e., from Rs2 lakh to Rs 2.5 lakh in the case of individual taxpayers, below the age of 60 years. Exemption limit raised from Rs2.5 lakh to Rs3 lakh in the case of senior citizens. This essentially translates to higher amount in your savings kitty for investment, which means it will easier for you to reach your financial goals. Now every taxpayer in the country, irrespective of tax of his/her bracket, will have a potential tax saving of Rs 5,150 per annum or Rs.430 per month.
- Deduction u/s 80C: Investment limit under section 80C of the Income-tax Act raised from Rs1 lakh to Rs1.5 lakh. The increase of Rs 50,000 under IT S 80C will provide you more room to reduce your annual tax liability. This means it also offers the opportunity to increase your tax-free investment if you use the mutual fund equity linked savings scheme (ELSS) and/or PPF for your 80C investment.
- Deduction of housing loan interest: Deduction limit on account of interest on loan in respect of self occupied house property raised from Rs.1.5 lakh to Rs. 2 lakh. So a taxpayer in 30% tax bracket will have extra tax savings of Rs 60,000 per annum or Rs 5,000 per month. More tax savings for you.
- Capital gain tax on Debt Mutual Funds: Debt oriented mutual funds earlier were classified as long term asset if the holding period was one year or more which has now been raised to three years or more and rate of tax on long term capital gains also increased from 10 percent to 20 percent. This will bring down your investment returns from debt mutual funds, making them unattractive avenues compared to bank fixed deposits.
- TDS on Life Insurance: Tax deduction at source @ 2% on sum paid under life insurance policy including bonus which are not exempt under section 10 (10D) if the aggregate sum paid in financial year is Rs 1,00,000/- or more.
- Capital gain exemption in case of investment in residential property: Now under section 54 F capital gains exemption in case of investment in a residential house will be allowed only on one residential property that too should be situated in India.
- Capital gains exemption on investment in Specified Bonds– There is a restriction under Section 54EC that the maximum of Rs 50 lakh can be invested in any financial year. As a result investors spread out the money over two financial years and can get exemption maximum upto Rs 1 crore but this has now been restricted to a total of Rs 50 lakh.
Small Saving Scheme
- Kissan Vikas Patra (KVP) to be reintroduced.
- A special small savings instrument to cater to the requirements of educating and marriage of the Girl Child to be introduced.
- A National Savings Certificate with insurance cover to provide additional benefits for the small saver.
- In the PPF Scheme, annual ceiling will be enhanced to Rs 1.5 lakh p.a. from Rs.1 lakh at present.
- Government notified a minimum pension of Rs.1000 per month to all subscriber members of EP Scheme.
- Increase in mandatory wage ceiling of subscription from Rs 6000 to Rs15000.
- EPFO to launch the “Uniform Account Number” Service for contributing members to facilitate portability of Provident Fund accounts.
KYC & Demat Account
- Introduction of uniform KYC norms and inter-usability of the KYC records across the entire financial sector.
- Introduce one single operating demat account so that investor can access and transact all financial assets through this one account.
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