BackHow Budget 2020 affects your FD and savings?
Get an inside look into how the Budget 2020 can affect your financial future and what you need to be ready
PremiumGiven the economic slowdown and high rate of unemployment that the country has been facing in recent times, this year’s budget was truly an important one. Presented by Finance Minister Niramala Sitharaman, the Union Budget certainly highlighted how the government plans to help Indians save more, and was based on 3 themes – aspirational India, economic development for all and building a caring society.
What are the new Income Tax slabs?
The biggest relief, perhaps, has come in the form of a set of new income tax slabs, applicable to those who forego certain exemptions and deductions. As per the new system, 70 tax exemptions have been done away with, and those with income falling in the Rs.5 to Rs.7.5 lakh bracket will have to pay 10% tax as opposed to the current 20%. Similarly, for citizens earning between Rs. 7.5 lakh and Rs. 10 lakh, the tax rate applicable will be 15% as opposed to the current 20% and for those earning between Rs.10 lakh and Rs.12.5 lakh the rate applicable will be 20%, as opposed to the existing 30%. Lastly, should you earn between Rs. 12.5 lakh and Rs. 15 lakh, you will have to pay tax at the rate of 25% instead of 30%. That said, incomes over Rs. 15 lakh will still be taxed at 30%.
While you have a choice regarding whether you’d like to stick to the existing tax regime or opt for the new one, the Finance Minister was quick to highlight that the new slabs, tax rates and foregoing exemptions will result in lower total outgo, thereby boosting savings. Additionally, our Finance Minister also shone the spotlight on the benefits of the GST regime, stating that MSME consumers have benefitted around Rs. 1 lakh crore annually. Moreover, the average household has been able to boost its monthly savings by 4% post the implementation of GST.
How to put your savings to better use?
While the jury is out on whether Budget 2020 has lived up to expectations, there’s no denying that it creates room for greater savings. As a taxpayer, this means that you can preserve a greater portion of your income and divert it towards wealth generation. While you can rely on regular savings accounts, it’s well-established that they don’t offer returns that can beat inflation. As a result, it’s important for you to consider instruments that offer better growth, along with the safety that you associate with a savings account. Given these parameters, a fixed deposit is a worthy contender, as it offers assured returns and isn’t linked to the market.
In fact, through Budget 2020, Niramala Sitharaman has made this instrument all the more lucrative. Should you invest in an FD from a commercial or cooperative bank, your investment is insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). Earlier, coverage for all deposits, including those in current accounts, savings accounts and by way of fixed deposits, extended up to Rs.1 lakh. Now, this limit has now been increased to Rs.5 lakh. Moreover, by investing in a NBFC FD, you give yourself the benefit of better interest rates, as well as a range of other benefits such as investment ease, access to emergency funds, and flexible investment tenor.
As always, how you opt to utilise your savings depends on your financial objectives and obligations. However, should you decide to invest in an FD, it’s in the best interest of your finances that you check the credibility and stability ratings of the FD provider, and also determine your returns through an FD calculator before you book an online FD.
Disclaimer: This content is distributed by Bajaj Finserv. No HT Group journalist is involved in the creation of this content.
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