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Budget 2018 seems to be an enabling budget for Indian women. It is, however a mixed bag with tax on long term capital gains and an increase in cess.
Just as a new month begins, we list down our expenses, pay our bills before our spending gets better of us.
Our finance minister, Arun Jaitley does something similar on an annual basis. He prepares the budget for the whole country but can afford to get away with overspending. He can raises taxes to earn more income and fund his spending. We don’t have that luxury.
On February 1, he presented his Budget of earnings and spending for the next financial year (Budget announcements are implemented from April 1 2018 onwards).
The Budget announcements enable us as an earner, saver and a care-taker. There are no major tax announcements which will make us alter our monthly budgets. It only disables our incentive to invest in shares or equity funds, as investments in these instruments will now be subject to a long-term capital gains tax.
Women who join workforce will contribute only 8% (as against 12% of the salary mandate now) towards employee provident fund scheme, for first three years. It’s a provident fund scheme where both employee and employer contribute a certain percentage.
The transport allowance (of Rs 19,200 per year) and a medical expenditure reimbursement (of Rs 15,000 per year) amounting to a total of 34,200 is allowed to salaried people. A new standard deduction amounting to Rs 40,000 replaces the transport allowance and medical expenses.
The existing education cess of 3% on the total income tax liability is increased by 1% and replaced with a new education and health cess of 4%.
Impact: The reduction in EPF contribution is a small measure which alone may not encourage women to join workforce just for this reason. The tax benefit of Rs 5,800 due to change in deductions could be negated by increase in cess.
The interest earned by senior citizens from fixed deposits or post office schemes will now be exempt upto Rs 50,000. Till now interest upto Rs 10,000 was exempt. Such income will be exempt from TDS as well.
The deduction for health insurance premiums paid by senior citizens has been raised from Rs 30,000 to Rs 50,000. The deduction for medical expenditure has also been raised from Rs 60,000 (or Rs 80,000 in-case of very senior citizens) to Rs 1 lakh.
Government had a pension scheme for senior citizens, Pradhan Mantri Vaya Vandana Yojana. The scheme managed only by LIC, had a maximum investment limit of Rs 7.5 lakh and offered guaranteed interest rate of 8.3%. The interest rate is lowered to8% and investment limit is hiked to Rs 15 lakh.
Impact: It gives more income in their hands and allows more deductions for health reasons. Women who are primary care-takers of their parents and are paying premium for them can also claim the deduction.
Also, senior citizens will be more inclined to invest in deposits rather than getting duped into products not suited to their age and risk profile.
Capital gains from selling shares bought more than a year ago, will be taxed as long term capital gains tax. Till this year, these gains were not taxed. Mutual funds will be subject to a dividend tax as well.
Impact: Capital gains above a limit of Rs 1 lakh will be taxed at 10% rate based on a complex formula. Considering the huge gains made in this recent rise in stocks, this wouldn’t really take away your profits from shares. Neither does it make stock investing less lucrative. Even after this 10% tax, it can help you meet long term goal of creating more wealth out of your savings.
The Operation Green Initiative: Government will spend Rs 500 crore to ensure ample production of basic cooking ingredients like tomatoes, potatoes and onions. The operation will make sure that farmers get professional assistance and logistics to ensure smooth production and transportation.
Impact: Women, who always ask four vendors before buying vegetables, will tell you how the prices of these essential commodities have fluctuated in last year. So if the benefits of the new proposed scheme really trickle down to the farmers, we won’t be storing tomato purees in our freezers.
Government has increased the target number for free LPG cylinders to rural women. More loans will be given to women self-help groups and there will be more education opportunities will be provided in villages.
A nationwide comprehensive health insurance scheme with provide health cover of Rs 5 lakh per family
Impact: Our household staff like maids, baby-sitters, drivers and their respective families in their native places will surely benefit from these measures. A happy maid will ensure we can achieve our dreams without the need to overspend!!
Image source: By Simply CVR (Flickr: Ladies) [CC BY-SA 2.0], via Wikimedia Commons
Rachna Monga Koppikar aka The Great Gruhini is a finance writer who’s worked with India’s leading publications for well over a decade. Having swam and mastered the treacherous waters of corporate and personal read more...
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