Budget 2017 – 7 Key takeaways for your personal finances

Budget 2017 was a mixed bag for retail investors. There was some cause of cheer due to no changes to equity taxation but those hoping for big income tax cuts were likely disappointed. We bring you the 7 key ways in which your personal finances will be affected:

1. No change in the equity taxation regime: A number of rumors were flying around about how LTCG may be introduced for equities and equity funds, the time period to qualify for LTCG may be increased, taxation for arbitrage funds may change etc. None of those apprehensions have materialised.
Effect: Positive

2. Income tax structure re-jigged: Tax rate for those in the income bracket of 2.5l to 5l halved from 10% to 5%. This has been partially compensated by imposing a surcharge of 10% on those whose annual income is between 50l to 1cr. Surcharge of 15% on those with income greater than 1crore continues. Further the Finance minister has also proposed a one page tax form for those with non-business income below Rs 5l. Also period for revising income tax has been reduced to12 months.
Effect: Depends on your annual income. People with annual income between 50l and 1cr will see increase in tax outgo. Those with incomes between 5l and 50l will see Rs 12,500 reduction in tax. More reduction for those in lower income brackets

3. Change in taxation regime for immovable property: Holding period for applicability of long-term capital gains tax decreased from 3 years to 2 years. Further the minister has proposed increasing the basket of instruments in which you can invest your gains from property to avoid capital tax.
Effect: Positive.  Intent of the Government also seems to be to encourage move from real assets to financial assets by making sale of real assets less taxing.

4. Impact of macro-economic announcements on markets and your investments: FM has proposed a fiscal deficit target of 3.2% of GDP for 2017-18 which was better than market expectations. Further the quality of the fiscal deficit has improved with focus on capital expenditure in rural areas and infrastructure. As a result, bond yields have come down benefiting holders of long-term bonds and debt funds. Equity markets should also respond positively to this. 
Effect: Positive.

5. Corporate tax rate reduced for MSMEs: Corporate tax rate applicable to companies with annual turnover<50 cr reduced to 25% from 30%.
Effect: Positive for small business owners

6. Cash transactions above Rs 3 lakhs to be banned: beginning April 1 2017
Effect: Positive for honest tax payers 

7. No major announcements on NPS but limits enhanced: The limit of amount to be contributed to NPS has been enhanced to 20% of the salary of an employee from earlier 10%. The same is applicable from April 1, 2018.