After the sweeping win of the Bharatiya Janata Party (BJP) in Lok Sabha Elections, people had high expectations from the Union Budget 2014. Being completely aware of this, Finance Minister Arun Jaitley opened his budget speech by saying that the government expects 7% – 8% growth in the coming years. But he also stated that people shouldn’t expect any miracle in the first year’s budget. Many experts term this budget as a “Populist Budget” since the budget has focused towards the long-term savings pattern of the middle class and strong support to the lower income group.
Uday Kotak, MD of Kotak Mahindra Bank said, “In the last five years, we have seen Indian savers move their money to gold and real estate. This time around, the focus is on financial savings. Increase in the 80C investment limit from Rs 1 lakh to Rs 1.5 lakh and increase in the I-T exemption limit are very good steps for small savers to look at more savings, and also consider investing in the capital markets.”
Here are some of the key points of Budget 2014 for tax-payers:
- Income Tax exemption limit has been raised to Rs 2.5 Lakhs p.a. for people below 60 years and to Rs 3 Lakhs p.a. for Senior Citizens.
- Investment limit under Section 80C raised from annually Rs 1 Lakh to Rs 1.5 Lakhs
- Public Provident Fund (PPF) limit raised from Rs 1 Lakh to Rs 1.5 Lakhs
- Tax Exemption on Interest Component on Housing Loans has been raised from Rs 1.5 Lakhs p.a. to Rs 2 Lakhs p.a. to boost the real estate industry.
- Standardized know your customer (KYC) Norms will be introduced and a common demat account for all types of financial transactions (stocks, mutual funds, insurance policies, etc) is on the cards.
- The tenure of Long Term Capital Gains (LTCG) has been increased to 36 months (from 12 months) but the tax on debt mutual funds has been doubled to 20% (from 10%).
- FDI limit in the Insurance sector hiked to 49% from 26%.
| Income tax exemption limit | New (from 2014) | Old |
| Individuals below 60 years | Rs.2,50,000 | Rs.2,00,000 |
| Senior Citizens | Rs.3,00,000 | Rs.2,50,000 |
| Investment limit under Section 80C | Rs.1,50,000 | Rs.1,00,000 |
| PPF ceiling | Rs.1,50,000 | Rs.1,00,000 |
| Exemption on interest of home loans | Rs.2,00,000 | Rs.1,50,000 |
Views from Industry Experts:
“Populist Budget with better relief to the service class people and not much to the manufacturing sector.” – Mr. Amber Arondekar, MD of Powertrain
“The budget appears to be middle-class friendly for sure. On the tax slabs – it is more savings oriented and helps encourage people to save more through tax savings initiatives! Commitments on infrastructure development are in line with election promises. Overall appreciate the Finance minister’s sensitivity towards development in the middle/lower segments of the society! Helps set a positive mood for the upcoming economic challenges in the months to come. What they do about the Banking infrastructure and new licenses is yet to be seen though! The message is clear – Growth but no short cuts.” – Mr. Sourav Mukherjee, Risk Management Leadership of a MNC Bank.
“Fiscal deficit targets reducing from 4.6 last year to 4.1 this year and 3.6 to 3 in the subsequent years look very ambitious, given that there have been neither tax nor expenditure reforms. All in all a pretty disappointing budget and the wait for ‘Acche Din’ has got prolonged. Will they ever come back?” – Vijay Amritraj, Co-founder & MD, Madras Café and Co
Salaried tax-payers have something to cheer in this budget as their savings will increase by a fair amount. In our opinion, this boost to financial savings stands out as a highlighting feature of Budget 2014. Please share your views (in the comments section below) on the changes introduced by Budget 2014.
