Fourty-two year old Niranjan said as he ruched to office, “I hear the budget would leave me with more money in my pocket.” I would believe so, I replied. “Could you help me plan my finances in the light of the budget announcements?” he asked. The budget speech had just concluded and we could not be absolutely certain on the implications till one goes through the fine print, I said.

However, as is known, the income tax slabs have been altered and the minimum taxable limit has been raised. The effect of changing slabs and increasing the minimum taxable limit from Rs 1.10 lakh to Rs 1.50 lakh affects everyone. For a person like Niranjan earning Rs 5 lakh or more per annum, the tax savings would be about Rs 45,000 per annum.

It would be prudent for him to increase his investments by at least half this amount in the coming year. He could use it to increase his investments in equities. This would help him achieve his financial goals like funding his child’s education and his retirement more easily.

STCG tax raised

But please do not continue with your speculative stock purchases, I had warned Niranjan. Trying to make money over the short term in the stock market has very rarely worked. The budget had now raised the tax on stock investments that are sold within less than a year.

This tax was raised from 10 per cent to 15 per cent. It was a hope that it will encourage investors to take a longer-term view when investing in equity markets. Niranjan looked a little disappointed but knew it was for the best. But there is some more good news for you, I told.

... contd.