Are families left with more funds post budget?
The Budget proposals intend to calm the nerves of the Indian household, which suffered the previous year due to double-digit food inflation apart from other inflationary and recessionary trends which affected family finances adversely.
From the perspective of financial planning, a larger disposable income is
channelised to long-term asset creation and meeting a family's financial goals.
The Budget proposes to leave more funds with the family for effective financial
planning. A household with a net taxable income of Rs 5 lakh can save an
additional Rs 20,600 in income tax in the new fiscal. This increases to Rs
51,500 if the taxable income rises to Rs 8 lakh.
The recent downturn drove families to manage their finances prudently, keeping
in check their discretionary spends. The additional disposable income should be
deployed towards achieving long-term financial goals, taking a cue from the
government's resolve to implement the Direct Taxes Code (DTC) with effect from
April 1, 2011.
The impending Exempt-Exempt-Tax scenario should propel families to invest
savings and liquidity not solely to save income tax. The implementation of the
DTC could redefine the taxation structure in savings instruments and
rationalise tax sops for home loans.
Goals such as retirement should be given a holistic view of long-term asset
creation by employing a strategic asset allocation and risk management regime.
The additional tax savings to the extent of Rs 20,000 in infrastructure bonds
to be notified by the government should be seen in this perspective where the
lock-in period and impact of tax on redemption need careful study..
The Budget further consolidates on the roadmap charted for a sustained high GDP growth of 9 per cent, with an emphasis on harnessing the economic growth to make development more inclusive and restructuring the government's delivery mechanism.
The government's determination to have greater financial inclusion, financial
literacy and inter-regulatory cohesion would aid the process of a sustainable
investment scenario, which will equally benefit the investing public and
industry.
We expect the roadmap to the 2010-20 decade to open up more avenues for
holistic financial panning by the Indian household.
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