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How will Union Budget 2015 affect your money?

There were several announcements that will affect your financial life in 2015-16 and beyond

Fuelled by hopes and expectations, the stock market opened higher on Saturday morning. However, as the budget speech got under way, volatility set in and at 11:59am, markets slipped into the red. After some seesawing through the day, the markets closed with gains, with the equity benchmark Sensex adding 141.38 points or 0.48%.

On the positive side, lower corporate tax tied with fewer exemptions should simplify the tax structure and promote investment.

The government’s focus on investment in the infrastructure sector was also viewed positively by the market.

However, parts of the market were disappointed since there were not many sector-specific announcements. The capital infusion figures planned for public sector banks too disappointed the market. Now that the big event is out of the way, the focus will again shift to how much the budget will help boost corporate earnings, which have been disappointing in the recent past.

There were several announcements that will affect your financial life in 2015-16 and beyond. In this edition, we take you through what the budget means for your money. Many proposals are intended to push household financial savings which, to an extent, will also boost retirement investing. In fact, social security was a major theme of the budget.

The additional deduction of 50,000 for investments in the National Pension System (NPS) is just one example. If you are an employee, you will now have the option of opting for either Employees’ Provident Fund (EPF) or the NPS. Taxpayers will also be able to claim higher deductions on account of premium paid on health insurance.

In terms of changes in individual taxes, wealth tax has been abolished and a higher surcharge has been imposed on the super rich.

This will be more efficient both for the taxpayers and the tax administration. As of now, individuals, a Hindu Undivided Family or a company have to pay 1% as wealth tax on net wealth of value over 30 lakh. In indirect tax, service tax plus education cess has been hiked from 12.36% to 14%. To encourage financial savings and attract investors going for gold, sovereign gold bonds are positioned as an alternative. While on the face of it, it’s a good idea, it remains to be seen if it will actually be able to attract investors as there are emotional and cultural issues involved with gold purchase. However, once more details are announced and if the idea takes off, this will be a big relief for the India’s current account.

In order to boost infrastructure spending, the finance minister proposed to reintroduce tax-free bonds. These are secured, redeemable, non-convertible debentures issued by government entities to mobilize funds needed for infrastructure development. This should help attract savings looking for stable long-term risk-free return. Among other measures, foreign investors have been allowed to invest in alternate investment funds.

Also, the budget provided more clarity on Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INViTs).

There have been issues on complaint redressals in the financial sector. The finance minister announced that a task force will be set up in order to establish a sector-neutral financial redressal agency.

The move can be seen a step towards introducing the Indian Financial Code. As of now, the redressals are with regulators.

Experts are of the opinion that it remains to be seen as to how this take shape and the way it will address consumer complaints. In the following pages, we guide you through specific budget proposals and how they affect your finances. This will help you understand how much tax you need to pay and to what extent you can save taxes with exemptions and deductions. We also tell you how the budget will affect your stock market investments as well as different sectors.

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