Budget 2015-20 Changes that affect your Personal Finance

There was huge expectation before Budget 2015 that Modi Govt will bring moon to all of us. Few created big lists of expectation. However, all were disappointed when the much awaited tax slabs not changed. So let us see what the changes are proposed in this Budget 2015 and how they affect your finance.

Yesterday I listed the major points of Budget 2015 and created a video on this. Please have a look at below video for the same.

Let us discuss each point in detail.

1) No revision Tax Slabs and Sec.80C limit

Finance minister has not touched the tax slabs and famous Sec.80C limit. So the earlier FY 2014-15 (AY 2015-16) tax slabs will continue. This is actually a big blow to salaried. They thought FM would revise it to some extent. However, no such magic happened. 

2) Sec.80D Health Insurance Premium limit raised

Earlier health insurance premium limit under Sec.80D was Rs.15, 000 for individual and HUF taxpayers. An individual can claim deduction towards the health insurance premium paid to himself, spouse, dependent parents, or dependent children of the assessee. In case of HUF, it is any member of a family. 

Now this limit is raised to Rs.25, 000 per year for individual and HUF. At the same time, for senior citizens, it is raised to Rs.30, 000 (from the earlier Rs.20, 000). So overall for your family you can save up to Rs.55, 000 (On own family Rs.25, 000+Rs.30, 000 for senior citizen parents). 

This budget gave some relief to senior citizens whose age is 80 yrs and above. Usually none of health insurance companies offers health insurance to these citizens. Hence, any health expenditure up to Rs.30, 000 can be claimed as deduction under Sec.80D. 

This upgrading of limit actually a big relief for all. Because you notice the hospitalization cost these days. So buy a proper health insurance, you must go for a higher sum assured. By increasing the premium limit under Sec.80D, the Government actually pushes for health insurance to all.

You can chose best health insurance for you based on my earlier post “IRDA Incurred Claim Ratio-How to choose the best health Insurance?”

3) New Pension Scheme (NPS) limit raised to Rs.1, 50,000

Earlier the limit under Sec.80CCD (1) was Rs.1, 00,000. This Sec.80CCD deduction relates to your contribution to NPS (either an individual or employee). Now this limit is raised to Rs.1, 50,000. 

4) Transport allowance limit raised

Earlier the monthly limit was Rs.800. Now it is doubled, i.e. Rs.1, 600 per month. Therefore, if you receive a transport allowance in your salary, then this is again a huge advantage for you. I feel this is a good move considering the cost of managing vehicle.

5) Now TDS (Tax Deducted at Source) on your RD (Recurring Deposits) too– 

Even though interest earned from RDs is taxable, but as of now, there was no TDS. Therefore, many people felt it easy to skip paying taxes on this. However, in this budget Govt amended Sec.194A. So effective from 1st June 2015-TDS of 10% on all your RDs under Sec.194A. However, there will be no TDS on RDs whose total interest is less than Rs.10, 000 in a year. This will protect small investors. Anyhow, it is wrong to believe that NO TDS means NO TAX. You still be liable for tax according to your individual tax slab on RDs.

6) Sukanya Samriddhi Account now with huge tax benefits

Earlier, when the Sukany Samriddhi Account was launched, it was ETE. Means whatever you invest in this scheme will be available for tax benefit under Sec.80C. Interest earned was taxable (as is NSC) but maturity was said as tax-free. However, in this budget FM declared that interest earned from this scheme is full tax-free. Therefore, it is now treated as an EEE scheme (Exempt while investing, interest earned is exempt and maturity exempt). 

If we consider the current trend then between Sukanya Samriddhi Account Vs PPF, I feel Sukanya Samriddhi Account holds good except on liquidity issue and some other minor features. 

7) Service Tax raised to 14% from an earlier 12 %

Earlier the service tax was 12% (excluding cess) and now it is raised to 14%. Along with that 2%, Swachh Bharat Cess also included. So earlier, it is 12.36%. Now it is 14.5% of service tax (14% Service Tax+0.2% Education Cess @ 2%+0.2% Swachh Bharat Cess @2%+0.1% Senior and Higher Education Cess @ 1%).

8) Wealth Tax discontinued, but with a surcharge of 2% if income is Rs.1 Cr or more

Earlier the wealth tax was collected to those individuals and HUF if their Net Wealth exceeds Rs.30 lakh on the last date of the previous year on certain assets. Now such tax was abolished. To compensate the loss, FM introduced 2% surcharge on individual or HUF if their income is Rs.1 Cr or more. This move actually brings in more income to Govt than wealth tax. 

9) 100% Tax Deduction under Sec.80G if you donate to Swachh Bharat and Clean Ganga

Whatever you contribute to Swachh Bharat and Clean Ganga schemes, the whole amount can be availed as deduction under Sec.80G. Let us contribute to these noble causes 🙂

10) PAN Card mandatory for all buy or sell of above Rs.1 lakh

From now onward if you want to buy anything, which is more than Rs.1 Lakh, then you have to quote your PAN number. This will bring the transaction into legality and tax angel. Hence there is no escape from avoiding tax or doing illegal transactions. Even FM also pointed that if someone tries to split the amount to make sure that the payment will be within Rs.1 lakh then too it will be tracked and penalize for such misdeed. From now onward, it is prohibited of acceptance or payment of an advance of Rs 20,000 or more in cash for purchase of immovable property.

11) Option to choose between EPF or NPS

From now onward, you have the option to choose between EPF or NPS. This gives some flexibility to employees to choose. However, this option is only meant for certain employees whose income is limited (This limit is not yet cleared as of now). Let us wait for more clarity on this.

12) Merger of two mutual fund schemes will not effect in your tax– 

Let us say you invested in mutual fund ABC and after a few years, this ABC scheme took over by new scheme XYZ. Then whatever the units you hold in ABC will have to be moved to XYZ. So as of now coming out of the mutual fund scheme ABC used to attract applicable tax laws (like LTCG or STCG). However, from now onward there will be no such tax in case of two mutual funds merger.

13) Surcharge on Dividend Distribution Tax (DDT) Debt Mutual Funds raised from 10% to 12%

You will now receive less dividends that earlier from your Debt Mutual Funds. Because surcharge on DDT raised to 12% from an earlier 10%. Earlier the DDT tax used to be 28.325% (DDT 25%+10% Surcharge+3% Cess). Now it is 28.840% (DDT 25%+12% Surcharge+3% Cess). 

14) Introduction of Tax Free Bonds

FM has proposed to introduce Tax Free Bonds. This will be good for those who are looking for tax-free instruments and stable income. FM announced that Rs.20,000 Cr worth of bonds will be issued to cater the infra, railway, and road projects. The interest from these bonds will be tax-free.

15) New Accidental Insurance which cost you Rs.12 a year !!!

FM has proposed to introduce the new accidental insurance called Pradhan Mantri Suraksham Bima Yojana. Sum Insured under this scheme is Rs.2, 00,000 and yearly premium is just Rs.12 a year.

16) Introduction of Gold Bonds and Gold Deposit Schemes-

If your motive is to invest in gold, but not for personal use then Gold Bonds will be for you. These are exactly like Gold ETFs or Gold Mutual Funds. So underlying asset will be gold and managed by Govt. I do not know how these are beneficial compare to Gold ETFs and Gold Mutual Funds. Let us see…

Let us say you have gold in nature of bars and coins (but not in the form of jewellery) then you can deposit into Gold Deposit Schemes and earn some interest on idle gold.

17) New Life Insurance of Rs.2, 00,000 for the yearly premium of Rs.300-

FM has proposed a new Life Insurance Pradhan Mantri Jeevan Jyoti Bima Yojana. This will offer you Rs.2, 00,000 Sum Assured. This covers accidental or natural death. The premium will be Rs.330 per year. Age group eligible to buy this plan are between 18 Yrs to 50 Yrs of age.

18) You will get benefit for usage of Credit/Debit cards

FM announced that Govt would come up with some incentives to promote the cash free money transactions. This includes usage of Credit/Debit cards or internet banking. This is actually the safest way of transactions. In addition, it prohibits illegal cash movement. 

19) Tax evaders will be penalized heavily

Tax evasion in related to foreign asset will lead to 10 yrs of rigorous punishment and 300% as a penalty on asset value. If you fail to file/hide information while filing return will lead to 7 Yrs of rigorous punishment. Therefore, it is now onward mandatory to file returns on assets you hold in foreign. Govt also proposed to introduce Benami Transactions (Prohibition) Bill to curb domestic black money.

20) Unclaimed EPF and PPF amount usage

FM has proposed that unclaimed EPF and PPF amount, which is idle with Govt, would be utilized for Senior Citizen Welfare Fund. This may to some extent give some benefits to seniors. 

To me apart from untouched tax slabs, rest of features looks attractive. I know many salaried not happy with this budget. But let us move and utilize the changes to our best.

46 Comments

  1. Sir,
    If my CPS amount is Rs 75000per year can I claim this u/s 80CCD Rs50000 and u/s 80C Rs25000?
    Thanks for your valuable information.

    Reply
      • CPS – Contributory pension scheme

        Reply
        • Dharsh (Priya)-Whether your CPS is towards NPS or which scheme?

          Reply
          • I think it is NPS. 10% of my basic+DA is deducted.

            Reply
            • Priya-First confirm about your own money investment like whether it is NPS or some other product. THINKING of investment may not work 🙂

              Reply
  2. Hi Basavaraj,

    I am working in a central government organisation. I contribute EPF up to the limit i.e 1,50,000.

    Can I also open NPS account to get the additional Rs.50,000 advantage for tax saving?

    Thanks.

    Reply
  3. Hi, I am an Insurance Agent working in LIC but due to some reasons with my Development Officer I do not want to work with LIC so can I work with other private Insurance Company using same Licence No issued by IRDA., Please Reply.

    Reply
    • Mahendra-You contact the insurance company through which you want to continue. They guide you.

      Reply
  4. Dear Basu..can you please elaborate more on the NPS ( national pension. System ) .is it a good or a better option for retirement savings as it mentions that it has tax savings plus market linked returns.

    Shalil Kani
    Mumbai

    Reply
    • Shalil-It has tax savings plus the market linked…but returns are taxable 🙂 Don’t go for this scheme where your money get blocked and mainly Govt regulated. But if you and employer both contributing to this scheme then no option but to continue.

      Reply
  5. Wheither cost of HEALTH CHECK UP exemted from income tax u/s 80D. If yes how much limitation?

    Reply
    • Arup-Sec.80D relates to health insurance you paid but not to health check up costs.

      Reply
  6. Hi Basu,

    Thank you for the great information you have provided.

    I had a query about EPF. I quit from one of the private firms that I worked with about 9 years ago. After 3 – 4 years I approched for a withdrawal of EPF. After a lot of running around, the amount wasa issued by the PF office as a cheque. But unfortunately, when I deposited teh cheque in the bank, the bank misplaced the cheque and they could not retrieve it. Now it has been 6 years that I have not bothered to reapply. Do you think I can still reapply? How will the interest be recalculated now?

    Reply
    • Rajitha-You can contact EPFO and raise your problem. Interest will be credited upto 3 years from last credit to EPF account.

      Reply
  7. Will the rebate of income tax u/s 87A continue according to the budget 2015-16?

    Reply
      • Thanks a lot for quick reply.

        Reply
  8. Hi basu, ur presentation is good it is simple & informative. Thanks for sharing with us.

    Reply
  9. Sir !!
    came across a recurring deposit scheme by local co-op credit society- (deposit of Rs.1000 p.m. for 77 months will give Rs.1 Lakh at the end of period. )

    how to know the rate of interest.??. compounded monthly or annually?

    any other better RD scheme from govt./pvt. banks or post office?? compare to above

    pl guide.

    Thanks

    Kiran

    Reply
      • As suggested by Basu, discuss with them.

        Just F.Y.I … You can check other bank websites as well.

        ICICI Recurring Deposit details.

        Monthly : Rs 1000

        Time period : 77 months

        Compounded Quarterly

        Total Savings: Rs. 1,02,447
        Interest Earned: Rs. 25,447

        Reply
  10. Hi Basu,

    The Proposed Swachh Bharat Cess ( 2% ) will be a cess on Service tax.

    So, Ideally Final % Payable will be Service tax % + 2% Cess on Service tax, which will be 14.28% and not 16% as shown in the video.

    This is my understanding from the budget. Can you please clarify on the same ?

    Regards
    Karthik G

    Reply
  11. Thanks Basu! Was waiting for this.
    TDS on RD is an important point, which I never saw in any news!!

    Reply
  12. Hi Mr. Basu,

    Thanks for sharing a valuable gist of the Budget-15 for common man. I have a query regarding Tax Exemptions for NPS. In Budget-15, Mr. FM has provided additional Tax Exemption of upto Rs 50,000 (up and above Rs 1,50,000 available under 80C) under Section 80CCD(2) for investing in NPS.

    Let’s say my Basic+DA is Rs 20,000 pm. I opt for NPS with my employer and he starts putting in 10% of Basic+DA = Rs 2000 pm in my NPS account. I also start putting in 10% of Basic+DA = Rs 2000 pm in the same NPS account.

    My Query is will this additional exemption of Rs 50,000 under Section 80CCD be applicable for BOTH Employer and Employee’s share (i.e. Rs 4000 pm). Or only Employer’s share be considered for this additional exemption and Employee’s share will come under Section 80C only?

    I and many others have been searching for this clarification but it is not clarified in any of the forums. What we are getting is Copy-Pasted version of the technical language from the Budget speech.

    Request you to please clarify this.

    Regards,
    Ravi

    Reply
    • Ravi-Please understand that Sec.80CCD have two under sections. One is Sec.80CCD (1)-This relates to an individual contribution to NPS (Either salaried or an individual). Earlier the Sec.80CCD (1) limit was only Rs.1,00,000. In this budget this limit was raised to another Rs.50,000 i.e. Rs.1,50,000 with the inception of new sub section 1 (B) and scrapped the earlier sub section 1(A). This additional Rs.50,000 can be claimed over and above Sec.80C limit of Rs.1,50,000. So now one can claim Sec.80C limit of Rs.1,50,000+Sec.80CCD of another Rs.50,000=Rs.2,00,000. Second one is Sec.80CCD (2)-This relates to your employer contribution. So there is no such higher limit set. Whatever your employer contribute the same can be claimed for deduction. So Sec.80CCD (1) is now the limit of Rs.1,50,000 and Sec.80CCD (2) is whole of what your employer contribute. Hope I resolved your doubt.

      Reply
      • Dear Mr. Basu,

        Can’t thank you enough for clarifying so well.

        Frankly, I am overwhelmed as now I can save Tax on Rs 50,000 (investment in NPS from my side) + whatever my employer agrees to invest in NPS.

        Earlier NPS was not a good option as their was no Tax incentive for the person to invest in NPS.

        But, what is your take on NPS after the changes made in current Budget (as there is a strong probability that some time in future (20-30 Years is a long time for such changes 🙂 ) NPS returns would be made Tax-Free)?

        Regards,
        Ravi

        Reply
        • Ravi-Major concerns are liquidity, performance and taxation of returns. So in my view the BEST Retirement yet to come 🙂

          Reply
          • Dear Mr. Basu,

            Totally agreed.

            NPS is a flop on the parameter of LIQUIDITY.
            Has not been comparable to MFs in PERFORMANCE.
            So far, the (lumpsum) returns are TAXABLE.

            But, considering that Retirement Fund is not to be Liquified, first criteria can be ignored for NPS.
            Also, NPS investment of Rs 50,000 will save you at least Rs 5,000 to Rs 15,000 in TAXES. So, even if it gives returns of 8%, you will be earning cumulative returns of anything between 20% to 50%!
            I am pretty sure that in coming years, the NPS Returns will also be made Tax-Free. 🙂

            So, sounds pretty good to me.

            Reply
              • Hello Sir

                I m reading ur articles from past 15 days and these are very useful. This article about budget 2015 is very useful & informative. It has cleared my confusion regarding NPS contribution exemption limit declared in budget 2015 as i has asked many people.

                My query is regarding NPS. I am state govt. employee & i have a NPS a/c as it is mandatory for govt. sector employees. My NPS Tier -I a/c is active.

                i want ur opinion regarding activation of Tier-II a/c as tax limit for NPS contribution has been raised as mentioned by u. Should i invest in NPS or in M/f’s. plz suggest.

                Reply
                  • Thanks sir for early reply

                    As u advised not to open NPS tier-II A/c.
                    I want investment in Mutual funds but i don’t know much about the market. plz suggest me should i go for this and what should i keep in mind while investing

                    I will be very thank full to u if u can suggest me some mutual fund for investment.

                    Reply
                    • Sandeep-We are investing in the mutual fund only because it is hard for us to analyze and monitor equity market. There are someone who assigned this task on behalf of you. Only the thing you need to keep in mind is, equity is for the long term (like more than 5 Years only). Also, yearly monitoring is a must.

  13. Thanks for sharing

    Reply
  14. basu, if you can please explain what is investor protection fund

    Reply
  15. Hello Sir,

    This is really appreciable for your effort in framing a video and specified illustration. It made very clear which and what benefits us.

    I have a query in regards of unclaimed epf n ppf amount.
    6 years back i worked to a private organisation where they deducted 3k amount every month for epf a/c and i was not given with any a/c number during my work period. After i quit from that organisation i didnt look about that epf amount. Do i have any chance to trace whether it got deposited for me?
    Thanks In Advance

    Reply
    • Madhurii-Do you have salary slip or revise salary letter (where they usually mention such info). If no then why can’t you contact the earlier employer?

      Reply
      • Unfortunately the Company has shutdown and i dont have any info about it in my salary slip.

        Reply

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