Mint Money Compass: From Norway’s welfare state to your own tax trade-offs: This week in Money

The idea of paying nearly half your income in taxes can sound excessive. But what if the trade-off was greater job security and state-funded long-term benefits such as healthcare, education, and retirement?

When Sutirtha Chakraborty and Jayita Chatterjee moved to Norway nine years ago for Chakraborty’s role to be a government doctor, the country’s strong welfare model did not immediately appeal to them, especially when they saw a significant portion of their income going towards taxes and the rest into Norway’s famously high cost of living.

Over time, however, as they navigated the responsibilities of raising a child and began thinking seriously about retirement, their perspective evolved. What once felt burdensome started to look reassuring in the form of long-term security.

In the latest edition of Mint’s series on Indians living and working abroad, the couple shares how their experiment with moving to Norway has unfolded. Shipra Singh spoke to them about how, when most essential needs are taken care of by the state, the pursuit gradually shifts, from chasing higher income to valuing more time with family and a better work-life balance.

Speaking of taxes, salaried individuals may want to once again evaluate how the old tax regime (higher tax rates but higher deductions and exemptions as well) stacks up, especially if you live in large urban centres such as Bengaluru, Pune, Hyderabad, or Ahmedabad and have children who are studying.

As part of the Income Tax Rules, 2026, notified last week, three proposals could tilt the balance back in favour of the old tax regime, as exemptions have suddenly become significant.

First, residents of Bengaluru, Pune, Hyderabad, and Ahmedabad may now be eligible to claim a higher House Rent Allowance (HRA), as these cities have been classified for the higher metro HRA benefit.

Second, the children’s education allowance exemption is proposed to increase from ₹100 per child per month to ₹3,000 per child per month, applicable to up to two children.

Third, the hostel expenditure allowance exemption is set to increase from ₹300 per child per month to ₹9,000 per child per month, again for up to two children.

These allowances, once too modest to matter and often ignored, could now translate into meaningful tax savings. Read Shipra Singh’s story to understand why the old tax regime may make sense for higher earners under these proposals. The proposals are open for public consultation till 22 February and are expected to come into effect starting 1 April.

In the investment space, the first story is on your debt fund strategy. After the Reserve Bank of India (RBI) kept policy rates unchanged and did not announce new liquidity measures in its latest monetary policy review, bond yields have risen. Since bond yields and bond prices move in opposite directions, this means bond prices have softened.

In this environment, experts suggest focusing on shorter-duration funds, such as liquid, money market, ultra-short, and low-duration funds, which are less sensitive to interest rate movements. In his story, Jash Kriplani explains why accrual strategies, which focus on locking in higher yields of short-term funds, may be a more prudent choice for most investors right now.

The second story takes you through the impact of the hike in Securities Transaction Tax (STT) on the Futures and Options trading. The Union Budget 2026’s decision to increase STT has made it even harder for retail investors to profit from short-term derivatives trading. Because most retail traders already incur losses in the high-risk F&O segment, the higher tax raises their breakeven point. According to Sebi’s July 2025 report, nearly 91% of individual retail F&O traders incurred net losses. Despite the losses, the majority of the loss-makers continue creating a cycle of addiction-like behaviour. Read this brilliant story by Anagh Pal, who deep dives into the impact of STT on the future of F&O trading.

And finally, another tax-related story. Khyati Dharamsi examines how high-value Ulips (unit-linked insurance plans) have lost their tax-free status but still retain certain advantages over mutual funds. Ulips purchased from 2021 with annual premiums above ₹2.5 lakh are taxed as capital gains at 12.5% on maturity. However, this is a flat 12.5% rate regardless of asset mix, unlike mutual funds, wherein the debt mutual funds purchased after April 2023 are taxed at the investor’s slab rate. Ulips also allow tax-free switches between funds within the policy.

This tax edge explains why insurers are launching New Fund Offers, mutual fund-style, to attract investors. But these benefits must be weighed against product limitations. Read the story to understand why separating insurance and investments may prove more effective over the long term.

In this week’s Mint Money interview, Ann Jacob had an engaging conversation with Kalpen Parekh, managing director and chief executive of DSP Mutual Fund. He advises investors not to read too much into budget announcements, arguing that long-term wealth is built by tuning out the noise, avoiding common behavioural traps, and staying consistent. He also shares insights into the recent rebalancing decisions within his own portfolio. Watch it on video here.

Until next week! Send in your feedback at deepti.bhaskaran@livemint.com.