With the backdrop of burgeoning fiscal deficit, the Budget provided policy insights and directions for growth and sustainable development of the economy which could translate into social well-being for all.
On the direct taxation front, without changing tax slabs or tax rates, a tax credit of R2,000 for individuals having a taxable income of up to R5 lakh has been provisioned to benefit 1.8 crore taxpayers.
The proposed additional incentive of R1 lakh (over and above R1.5 lakh) in deduction of interest paid on housing loan up to R25 lakh for first time buyers of house in the financial year 2013-14 would boost housing demand, construction industry, labour deployment and housing finance industry.
The Budget does allow benefits for the investors in multiple ways. For new investors in the capital markets making an entry through the Direct Equity or the Mutual Fund route, the tax concessions through Rajiv Gandhi Equity Savings Scheme (RGESS) have been extended cumulatively to 3 years. Further, the eligibility income criterion for availing the tax concession has been liberalised to R12 lakh from the present R10 lakh. This would certainly encourage more individuals to invest in the capital markets, thereby helping our country progress from a 'Nation of Savers' to the 'Nation of Investors'.
As a governing principle for establishing a good financial plan, one could ensure that expenses do not exceed one-third of one's net income, savings/investments are at least one-third, and debt servicing for home loans (notwithstanding any temptations!) should not go beyond one-third of net income.
For individuals the Budget does not warrant any significant change in their overall financial plans. The individuals should also restrain spending on luxuries such as SUVs and high-end mobile phones which have been discouraged in this budget, and increase their allocation towards investments in financial products.