Budget: 12 measures that affect you!

The Union Budget 2010 presented by Finance Minster Pranab Mukerjee has been received positively by the stock market investors. This is evident from the sharp jump in the Sensex and Nifty.

1. The biggest positive

By far the most attractive thing in the Budget 2010 for individuals is the increase in the income tax slab limits. Though the entry level slab for income tax has not been changed from Rs 1.6 lakh (Rs 160,000), there is a considerable jump in the other slabs. A majority of income tax payers in the middle class and upper middle class have a lot to cheer from the Union Budget 2010.

The income tax slabs have been changed drastically. The new slabs are as below:

People with income up to Rs 1.6 lakh will pay zero tax.

People with income between Rs 1.6 lakh and Rs 5 lakh will pay 10% tax.

• Thus anyone who is in the Rs 3 lakh to Rs 5 lakh bracket currently will get to save around Rs 20,000, approximately.

People with income between Rs 5 lakh and Rs 8 Lakh will pay 20% tax.

• Thus anyone who is in the Rs 5 lakh to Rs 8 lakh bracket now will get to save up to around Rs 30,000.

People with income more than Rs 8 lakh will pay 30% tax.

• Calculate your new tax

In the words of the finance minister, this proposal will bring relief to about 40 per cent of the current tax payers.

On the paperwork front too there is some cheer as the finance minister has said that a two page SARAL -2 is ready and will simplify the process of filing our returns.

The limits for auditing of accounts of professionals has been raise to Rs 15 lakh and for companies it has been raised to Rs 60 lakh.

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2. Infrastructure bonds are back!

Apart from this the finance minister has also given an additional deduction of Rs 20,000 for any investments in Infrastructure bonds. This will be over and above the Rs 1 lakh (Rs 100,000) we already have.

Rs 20,000 has been introduced as the additional limit for investment in Infrastructure Bonds. Infrastructure Bonds are thus making a comeback after 5 years as a savings option for tax savers.

This will also reduce the tax burden for a few who are interested in traditional savings tools. This Rs 20,000 will be over and above the current limit of Rs 100,000 in various tax saving schemes.

Meaning we could even save up to 10 per cent of our income in case we are in the lower end of any of the slabs by putting our money into the development of infrastructure of the country.

There is a large focus give to developing infrastructure in the country. Over 40% of the total outlay has been given towards developing infrastructure. This added with the deduction to investments in infrastructure bonds will surely help us see better infrastructure in the coming years.

3. New pension scheme push

A renewed push has been given to the New Pension Scheme in this Budget. Till now the New Pension Scheme has not found much favour from the common public due to typical teething problems related to its implementation.

Our finance minister has proposed to give Rs 1,000 as a starting incentive to all accounts of NPS opening in the next three years. This is a welcome measure, as the NPS is as of now the key Contributory Social Security Scheme in India.

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4. Housing interest rate

The finance minister has said that the interest support of 1% for low-cost housing loans will be extended for the next year too. This is a boon for the builders of townships and also the aam aadmi of India who could not afford costly houses. This is a direct form of supporting the recovery of the economy itself.

5. Not so happy news for car buyers

Car buyers who were waiting to hear some good news from the budget seem to have suffered a short term as well as long-term hit from the Budget

The hike in excise duty to 10% will mean a hike in the prices of cars. Especially, large cars and SUV's. This is the 'capital' hit that prospective car buyers will take.

Even if they are able to buy the car they will have to spend more as the prices of diesel and petrol are set to rise by at least Rs 2.67 per litre.

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6. Gold lovers saddened

The finance minister has suggested a hike in the duty charged on gold and silver imports. Prices of gold are set to increase as the budget has proposed a Rs 10 per gram hike in the indexation of gold and platinum. This could see a price change especially in the prices of branded jewellery.

7. More banks coming our way:

The Reserve Bank of India is set to dole out additional banking licenses to private sector players as well as Non banking financial companies. More bank branches, more ATMs, better services and more products could be coming our way soon.

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8. Contribution to CGHS

Apart from the deductions we are currently eligible for investing in health insurance schemes, the finance minister has suggested that citizens can now also avail the same benefits for investing in the Central Government Health Scheme.

9. Service Tax unchanged:

With a keen focus on the GST, the service tax rates have been retained at 10%. Thus prices in the service sector do not seem to be facing any hike.

10. Support for rural people

Agriculturists and people livings in rural India can have a breath of relief. The farm loans have been given an extension of 6 months.

Not only that, new loans will be getting government support of 2% reduction in interest rates. Effectively this brings down the farm interest rate to 5%. The earlier support was limited to only 1%.

The rural communities in non-arable areas get support from the continuation of the Mahatma Gandhi National Rural Employment Guarantee Scheme. The budget has allotted Rs 40,000 crore (Rs 400 billion) for this scheme, which is now being implemented across the country.

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11. Microfinance support

Recognizing the major change in development brought about by micro-finance companies in India, the finance minister has proposed a Micro-Finance Development Fund to support microfinance companies.

At Rs 400 crore (Rs 4 billion), the fund size is small but being with right intention, the gesture is one in the right direction.

12. Banks loans

Rs 16,500 crore (Rs 165 billion) has been budgeted for providing the Tier-I capital required for some PSU banks. This will improve the lending capacity of these banks.

The Budget 2010 has also made additional provisions of capital for lending to rural areas.

These measures will not only stabilise banks but also provide the much needed muscle to improve the loan portfolio of public sector banks.

Additional licenses are being planned for private banks. NBFCs will also get a chance to open banks. The modalities will be discussed in detail shortly.

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Overall an individual-friendly Budget

Based on the above concessions and support for lending and investments, we can conclude that Budget 2010 is very much friendly for the individuals of India.

The salaried class may rejoice in their tax out goes coming down in a big way. The rural population can cheer over their cash outflows coming down and/or postponed. Banks, housing developers and those buying low cost houses can be happy with the 1% interest support.

A budget at a critical time, but has brought job to most individuals. Pranab-da, your magical spell is working!