Even though the stock markets have not responded enthusiastically to the budget, the Finance Minister, in our view, deserves an 'A' for his effort. The retail investor must surely support this view.
As far as you, the retail investor, is concerned, our view is that the net impact of the budget is positive.
First, the bad news:
We all will now have to pay a 2% cess i.e. if your tax liability is Rs 100, you will need to pay Rs 102. This will hit all tax payers save for those in the above Rs 850,000 pa bracket who were paying a surcharge of 10% earlier.
Second, dividends declared on investments debt mutual funds (including monthly income plans) by individuals and HUFs will continue to attract a distribution tax of 12.5% (this rate has been enhanced to 20% in case of investments by corporates). The much needed respite for retail investors has not been provided.
Third, a tax of 0.15% of the value of the transaction will be levied on transactions that take place on the stock exchanges (if you buy shares worth Rs 100,000, you will have to pay Rs 150 to the government).
To be fair, the last two points are not really negatives. The dividend distribution tax already existed and the transaction tax has been introduced in view of the changes having been made to the capital gains tax regime.
Now to the great news!
One, the returns offered by the small savings schemes have been maintained at existing levels. The PPF will continue to pay 8% pa. The GOI Bonds (Relief Bond) too will continue to exist in its present avatar. In other words, the declining interest regime, atleast for now, has come to an end.
Two, senior citizens will finally have a dedicated savings scheme the Senior Citizen's Savings Scheme, which will yield 9% pa. The
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