Arun Jaitley the Finance Minister of India, will present the Union Budget 2018, on February 1st 2018. This is Prime Minister Narendra Modi Governments, fifth budget and the last full-fledged Budget, before the 2019 Lok Sabha Polls.
After Demonetization and GST, the Union Budget 2018-19 is very important. This Budget is widely expected to be a populist budget. A budget which looks into the general concerns of the public, is called a populist budget.
We have already written how the tax exemption limit may be hiked from Rs 2.5 Lakhs to Rs 3 Lakhs and also how the Section 80C limit could be raised from Rs 1.5 Lakhs a year to Rs 2 Lakhs a year. You may read this at, The Budget For The Middle Class and What To Expect From Union Budget 2018-19?
It's time to take a look at what else this Union Budget 2018 throws up. Want to know more on tax planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
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This will be a Budget for the Middle Class. The Finance Minister wants to help the Middle-Class citizens of India, reeling from the effects of high inflation. CPI Inflation which measures retail inflation, rose up to 5.21% for the month of December 2017. Expect this Budget to bring relief from taxes, you so badly need.
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1. Increase in the medical reimbursement limits
Your employer might offer you the medical reimbursement facility for medical expenses. If your employer offers you this facility, you get medical reimbursement up to Rs 15,000 a year, on furnishing medical bills. You enjoy a tax exemption on this amount. Take a look at doctors charges and medical bills.
Do you think medical reimbursement of just Rs 15,000 a year is enough as a tax exemption? Don't you think the limit must be raised to at least Rs 30,000 a year?
The National Pension Scheme (NPS) is a very good investment for retirement. It has the potential to be a super-hit investment for the youth in India. But there's a small problem. Employee Provident Fund (EPF) a rival to the NPS, enjoys the EEE benefit. The amount invested enjoys a tax deduction under Section 80C, up to Rs 1.5 Lakhs a year. The returns (interest) and the amount withdrawn at maturity are tax-free.
EPF invests most of your money in fixed income and you earn interest. With the Government cutting interest on small saving schemes, EPF interest rates have come down. This is where NPS is a great investment. NPS invests up to a maximum of 50% in equities, depending on your age. So NPS can give high returns when compared to EPF. But there's a problem. NPS falls under the EET regime. When the amount invested enjoys Section 80C benefits and the returns at tax-free, the problem is at withdrawal.
NPS withdrawals are taxable. For NPS withdrawal at retirement, 40% of the accumulated amount must be compulsorily used to buy an annuity plan. Out of the remaining 60% accumulated amounts, 40% is tax-free, but 20% is added to taxable salary and taxed in the year of withdrawal as per your tax bracket.
Would it not be a good idea to make the entire 60% accumulated amounts in an NPS investment tax-free at withdrawal?
If you avail a home loan to buy a house/apartment, you get a tax deduction up to Rs 2 Lakhs a year on the EMI (Interest) component of the home loan. You get an additional deduction of Rs 50,000 on interest repayment for home loan under Section 80EE, if you are a first-time home buyer, provided your home loan was sanctioned between 1st April 2016 and 31st March 2017.
Would it not be great if this benefit could be extended for first time home buyers who have home loans sanctioned beyond 31st March 2017?
There is another condition for first time home buyers to get the Section 80EE deduction. The value of the property must not be more than Rs 50 Lakhs. The rule doesn't consider the size or the location of the house. If you are a first time home buyer who has availed a home loan, chances are property costs in a major city will be more than Rs 50 Lakhs.
Should not the value of property to get Section 80EE benefits be raised above Rs 50 Lakhs?
Yes, the Union Budget 2018 is just 15 days away. Get ready for a cracking Budget. Be Wise, Get Rich.
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