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Union Budget 2014 changes related to Investments

 

Highlights of Union Budget 2014 related Investments

The new government on Thursday unveiled its first budget of structural reforms aimed at reviving growth, developing Infrastructure and thus winning praise from investors.

Finance Minister Arun Jaitley said he would uphold the fiscal deficit target of 4.1 percent inherited from the last government even though it is a daunting task, while incremental steps were also announced to boost capital spending and reassure foreign investors that they would get fair treatment.

According to Mr. Jaitley, steps announced are only the beginning of the journey towards a sustained growth of 7-8 per cent or above within the next 3-4 years along with macro-economic stabilization.

From Personal Finance and Investment point of view, we highlight below the points from Budget 2014 –

1. Personal income tax limit for individuals aged below 60 years raised to Rs 2.5 Lacs. In case of senior citizens the limit is raised to Rs. 3.00 Lacs. This can result in a savings of around Rs.13 per day for the small tax payers.

This proposal, according to a rough estimate is likely to benefit around 2 Crore tax payers.

80 C investment limit hiked from Rs. 1.00 lakh to Rs. 1.50 Lacs – This can boost investments in Mutual Fund ELSS schemes, Insurance policies, PPF etc. and thus help boost domestic savings.

2. Annual investment ceiling in PPF hiked to Rs 1.50 Lacs – This is can boost savings for risk averse investors while saving income tax as well.

3. Tax deduction limit on account of interest of housing loan in case of self occupied property has been raised to Rs. 2.00 Lacs from Rs. 1.50 Lacs. Therefore, those who have taken home loans can save some more taxes if the property is self occupied.

4. New Dividend Distribution Tax for Non-equity schemes as follows, effective October 1, 2014:

5. Long term capital gains tax on debt funds has been increased from 10 % to 20 % on transfer of units. Classification of long term for debt funds would be 36 months instead of 12 months as earlier. This can make debt funds less attractive as the tax rates has been hiked

Effective date (redemptions after) 01, April, 2014

Debt Mutual Funds

12 months

36 months

Liquid/Money market

12 months

36 months

Duration funds

12 months

36 months

Fund of Funds (domestic and overseas)

12 months

36 months

Tax Rate (maximum)

10.0000%

20% (with Indexation)

6. A special small saving scheme will be introduced to encourage requirements towards education & marriage of the girl child.

7. Kisan Vikas Patra (KVP) to be reintroduced under small savings schemes

8. A National Savings Certificate with insurance cover to provide additional benefits for the small savers

9. EPFO to launch unified account scheme to ensure Provident Fund portability

10. Introduction of uniform KYC norms and inter-usability of the KYC records across the entire financial sector.

11. Proposal to Introduce single demat account for all types of financial transactions

12. Uniform tax treatment for pension fund and mutual fund linked retirement plan

13. Varishtha Pension Bima Yojana (VPBY) to be revived for a limited period from 15 August, 2014 to 14 August, 2015 for the benefit of citizens aged 60 years and above

14. A committee will be formed to examine and recommend how unclaimed amounts with PPF, Post Office, saving schemes etc. can be used to protect and further financial interests of the senior citizens

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