Grinning wide: The seniors have a lot to cheer about with this budget
The raising of deduction under Section 80D for the payment of a health premium for the parents is also a welcome move. With the raising of limits by Rs 15,000 for deduction under Section 80D, the minister has given the impetus to taxpayers to buy adequate cover for themselves and their parents. What this means is health insurance limits within Section 80D has gone up to Rs 30,000 for all and from Rs 20,000 to Rs 35,000 for senior citizens. This should boost insurers to come up with new products that are attractive and packed with healthcare benefits for individuals to sign up and claim deductions as well as protection from this move.
A fourth thing that works for senior citizens is the fact that the reverse mortgage product will not be taxed. Many senior citizens are cash-poor but asset-rich, with all their equity in the homes in which they live. In the absence of support from their children, such people can now buy a reverse mortgage product that gives them an income flow against the home in which they live. Since the product is very new in India, the tax status of this income flow was not clear. The finance minister has made it clear now that such transfers of money will not be taxed as income, giving a big relief to the 600-plus people who have already availed this product and the thousands more who may do so in the next few years.
Working tax payers get some cushion too
Service tax: It's a key area for the government to tax since it is the fastest-growing sector in India today. The base of service tax has been broadened by inclusion of four new services under the fold of service tax, bringing the total services to 104 now. The one area that will have maximum impact will be the inclusion of service in respect of asset management services provided under unit-linked insurance plans (Ulips). This will have a direct effect on lowering the returns under Ulips since the expense ratios will rise. However, it remains to be seen how the insurers absorb this cost. On the other hand, the threshold limit of exemption for small service providers has been increased from Rs 8 lakh a year to Rs 10 lakh a year, resulting in some 65,000 small service providers going out of the tax net.
Tax on investments: There is some concern among those who trade regularly on the stock exchanges. The rate of short-term capital gain, where the securities transaction tax is paid, has been increased from 10 to 15 per cent, a 50 per cent hike at one go. Expect day traders to complain. But, some relief is there for them since they can now claim the securities transactions tax (STT) paid on transactions as an expenditure from their income. For long-term investors, however, life will go on as usual with equities and equity mutual funds held over one year being exempt from capital gains tax. Commodity traders too will now come under the stt and will have to pay the 0.125 per cent tax on their market operations.
With health insurance limits up, tax payers will buy more cover for themselves and their parents.
Other proposals: Over the last couple of years, the permanent account number or the pan card has been made mandatory for most financial transactions like stockmarket participation, buying mutual funds and so on. According to the finance minister, the quoting of a pan number will be extended to other financial services as well. Insurance companies, who have had an unfair advantage over the MFs, will lose out on this. By scrapping the BCCT (banking cash transaction tax) applicable from next year, the minister has made life simple for those who were being punished for occasional large withdrawals.
Overall, it's a budget that should put money in the hands of the consuming public through fiscal measures. The FM acknowledged the difficulty in using the monetary mechanism to cut interest rates in a regime of strong capital inflows, rising commodity and oil prices and hence the threat of inflation. In the absence of having the monetary policy tool to stimulate growth, he's hoping that you and I spend more to stimulate the consumption-led growth further.
