Budget 2018: With the Union Budget 2018 just two days away and even as various stakeholders lay out their respective key expectations from Finance Minister Arun Jaitley, top experts point out that Union Budget 2018 could impact your personal finances in varied ways.
Budget 2018: With the Union Budget 2018 just two days away and even as various stakeholders lay out their respective key expectations from Finance Minister Arun Jaitley, top experts point out that Union Budget 2018 could impact your personal finances in varied ways. While, Finance Minister Arun Jaitley has the daunting task of managing the country’s fiscal prudence, and at the same time provide relief to the sectors which have been impacted by structural reforms, experts observe that the Budget will have ramifications for household budget too. While there are talks of Finance Minister Arun Jaitley providing relief to taxpayers to woo the section, as the government eyes 2019 elections, the budget will may also negatively impact the personal finances. We take a look at four different ways in which Union Budget 2018 could impact your personal finances.
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Lower return on debt instruments
With expectations of Finance Minister Arun Jaitley looking to tap fiscal policy, ie. use taxation and policies relating to public expenditure to spur GDP as against monetary policy tools such as using interest rates, your debt instruments could earn lower returns. As the RBI has already cut rates by 375 basis points in the last three years, there’s limited room for further manoeuvre. With the government looking to focus on fiscal policy, the debt instruments may continue to yield lower returns, Motilal Oswal said in a recent note.
Long-term investments may become attractive
Experts point out that Finance Minister Arun Jaitley may make announce measures to augment long-term investments. In a recent note, Angel Broking said that mutual fund investments may become eligible for income tax benefits under Section 54EC in the upcoming Union Budget 2018. “Section 54EC benefits are available when long term capital gains are reinvested in specific infrastructure bonds with a lock-in period. In the past, mutual funds and infrastructure equities were also included under the definition of eligible investments under Section 54EC of the Income Tax Act,” the firm noted. Angel Broking says that the move will give a boost to investors looking to create wealth over the long-term. “In fact, if the government goes ahead and enhances the cut-off for LTCG on equities to 3 years, then extension of Section 54EC to equities will be a good measure to neutralize the effect. Again this will be a big boost for investors to look at equities for the long term,” Angel Broking said.
Small savings may yield low returns
After the government slashed interest rates on small savings schemes by 20 basis points in December-17, including NSC and PPF from January- March, experts say that the small savings schemes will continue to earn lesser returns. A PPF account will now earn an interest rate of 7.6% from 7.8% earlier. In case of National Savings Certificate(NSC) too the interest rate has been slashed by 20 basis points to 7.6%.