Things you must know about the budget to be able to effectively plan your next year’s financial journey
Getting into the fine print always gives you some rewarding insights. Here are some aspects of the budget this year that you must take into account and make use of to manage your finances more effectively.
To be able to effectively manage your investment plans and also keep track of your financial journey in times to come, it’s important to keep abreast of not just the headlines, but the finer print in the budget. This year, there have been many changes that you must be aware of to be able to plan your next steps effectively. This is important both from a point of view of assessing your current investments and also changing the course of your future investments basis the newer bits that have been introduced. Needless to say, there are opportunities that you can make use of to create a sound financial plan if you are alert and plan ahead. Read on to know more:
1. ‘New Life Insurance policies issued on or after 1st April, 2023, where aggregate premium for life insurance policies (other than ULIP) is above INR 5Lacs proceeds are now proposed to be taxable’.
SI: Major jolt for investors who have been investing in Life Insurance Policies, earning tax free returns, even if it was on a lower side. With no social security available to citizens, pension withdrawn by the government, inflation at peak and unemployment rising, this has come as another jolt.
2. ‘Tax rebate limit extended to 7 lacs, under New Tax Regime. Changes in tax slabs & new tax rates (Under New Scheme), amongst many other changes.
SI: The Government is expecting 50% tax payers to move to the new tax regime. The changes in Direct Taxes seem attractive and would leave higher disposable income for the tax payers.
3. ‘REITs / InviTs: Change in taxation for repayment of debt.
SI: There is a clarity on taxation of REITs/InviTs, where the new structure would increase the taxation and impact prices in the market, thereby affecting the returns.
4. ‘Market Linked Debentures (MLDs) / Structured Products will now be fully taxed as short-term capital gains.’
The instrument was attractive investment opportunity for many HNIs and Corporates. Earlier it was taxed under the capital gain tax rates of equity, but now, it would be taxed as per debt taxation.
5. ‘Deductions from capital gains arising out of the sale of residential house under sections 54 and 54F have been capped at 10 Crore.’
It is a major setback to Super HNIs, who have been selling their properties worth crores and reinvesting in residential property to avoid paying capital gains.
6. ‘No more circumventing from paying TDS on wins from Online Gaming.’
After crypto currencies, the government has proposed to impose 30 % tax on the gains from online gaming, categorised as gambling.
7. ‘For those investing abroad through LRS (Liberalized Remittance), the TDS is now increased to 20%.
This would impact Super HNIs and corporates as it has been widely used by them to diversify their portfolio outside India. Middle class and HNIs have been using MFs for taking exposure in Global markets which aren’t affected with such regulations.