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This article was first published 9 years ago  » Getahead » Budget 2015: The impact on your salary and savings

Budget 2015: The impact on your salary and savings

By Rajiv Raj
Last updated on: March 02, 2015 18:40 IST
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Simple takeaways from the Union Budget 2015-16 and how it impacts your life

With the Union Budget for the year 2015-2016 just behind us, the pink papers are rife with what Finance Minister (FM) Arun Jaitley has delivered to the nation. If all that the experts are saying are somewhat getting lost in translation for you, worry not, for here we are with simple takeaways from the Budget and how it impacts your life.

For the common man the message that our FM had was very clear. Save more and spend less. Thus, while service tax has been hiked to 14 per cent from the earlier 12.36 per cent, tax exemption on contribution towards health insurance and pension funds have been increased. Senior citizens and the girl child have also been given special attention in this budget. Now let’s delve a little deeper to see how it all translates for you.

The impact on your salary and savings

The FM has hiked the tax exemption on transport allowance to Rs 1600 from Rs 800 a month. This means you can claim an annual deduction of Rs 9600 annually on transport allowance. There’s more you can save with tax exemptions.

The limit of reduction on health insurance premiums has been enhanced to Rs 25,000 from the earlier Rs 15,000.

Senior citizens get a higher tax exemption of Rs 30,000 on health insurance premiums from the earlier slab of Rs 20,000.

For very senior citizens (above 80 years) who cannot take health insurance, Rs 30,000 has been exempt annually for medical expenditure. In case of specified diseases of very senior citizens the tax deduction has been enhanced to Rs 80,000 from the earlier Rs 60,000.

The differently-abled citizens have also been kept in mind. The limit of deduction for the medical expenditures of such citizens have been hiked to Rs 75,000 from the earlier Rs 50,000.

In case of severe disability this limit has been hiked to Rs 1.25 lakh from the earlier limit of Rs 1 lakh.

The NDA Government also wants you to be conscious and put away money in a retirement corpus. Therefore, for making a contribution towards any pension fund and the New Pension Scheme, you get a deduction of Rs 1.5 lakh from the earlier deduction limit of Rs 1 lakh.

If you have a girl child, there is further good news for you. The FM has announced that all investments in the recently launched Sukanya Samriddhi Scheme, a small savings account for the girl child, as well as all payments to the beneficiaries including interest payment is exempt from taxes.

Fuelling the Indian passion for gold

Indians have traditionally been smitten by the yellow metal. But they have a tendency to hoard it, which does nothing for the economy. The Government has therefore come out with new ways to fuel this Indian fascination for gold.

Firstly the FM announced the introduction of a Gold Monetisation Scheme. This will work just like a deposit scheme, where you can deposit your gold in a bank and earn interest on it.

There will also be a new sovereign gold bond that can serve as an alternative to purchasing the metal gold. This bond will carry a fixed rate of interest and can be redeemed against the face value of gold at the time of redemption.

Further to discourage those who purchase gold coins from abroad, the FM announced that work shall soon commence on developing an Indian gold coin that will carry the imprint of the Ashok Chakra.

Uplifting the youth -- Make in India

The Governement has taken cognisance of the fact that in order to boost the population of a nation like ours that is young and aspiring, concrete steps need to be taken to encourage entrepreneurship. The FM therefore announced the allocation of Rs 1000 crore to encourage entrepreneurship and start-ups in the nation.

Further the FM announced a special fund allocation of Rs 150 crore for the creation of a new innovation platform called the Atal Innovation Mission that will encourage research and development and promote a network of innovation hubs across the nation. It was heartening to note that the Government believes that the youth of India should be ‘job creators’ and not ‘job seekers’ and thus has introduced these steps to spur the youth.

The other laudable initiatives towards harnessing the power of the youth that the FM announced were the proposals to launch the ‘National Skills Mission’ that will focus on skill development and vocational training and the formation of a new scheme called ‘Nayi Manzil’ that will bring confidence among the unemployed youth in India.

All these measures have been taken keeping the ‘Make in India’ initiative of the NDA Government. The policymakers seem keen to harness the great potential of the youth of the nation to give a boost to manufacturing, entrepreneurship and creativity in the nation that will take it to its next trajectory of growth.

What gets cheaper and what gets costlier

After every budget is announced, all that the common man wants to know is what gets cheaper for him and what is it that he will have to shell out more for. So here is the lowdown.

As a precursor to the Goods and Services Tax (GST) that comes into play from April 2016, the Government has proposed a consolidation of education cess and service tax. Thus the service tax that you have to shell out is 14 per cent instead of the earlier 12.36 per cent. As a result, restaurant bills, laundry services, visits to the beauty parlour, gym memberships, air travel, radio taxi travel, watching movies in multiplexes, and cigarettes are set to get costlier.

But wait, all is not lost!

For those who have a shoe fetish can rejoice as leather footwear is set to become cheaper as excise duty on leather footwear has been brought down from 12 per cent to 6 per cent for those footwear that are priced at more than Rs 1000 per pair.

Other items that are set to get cheaper are locally manufactured mobile phones, LED/LCD panels (go ahead and change your television set now!) LED lights, biscuits, juices, processed foods, refrigerator compressors and microwave ovens. Visits to museums, zoo and national parks will also be cheaper. 

In conclusion it is therefore right to say that the FM did not go overboard to make populist announcements and given the fiscal constraints that he is still operating under, he has done his bit to boost the spirits of the aam aadmi. Sure, cigarettes and eating out are set to become costlier, but that is not such a bad thing, is it?

How about giving your lungs some fresh air and cooking up a storm at home?

Photograph: 401(K) 2012/Creative Commons

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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Rajiv Raj