My Point of view on Budget

Why I am writing the below article? My mobile was beeping / ringing most of the weekend (3rd and 4th Feb).

Hence I thought let me read a budget fine print and see if I can provide some insights on the questions most asked.

Majority of the calls were stating, there was nothing in this budget for working class and middle class and they sounded very unhappy. L

 “Is there was really nothing in the budget for middle-class/salaried-class?” If we look the budget and read headline as ‘I” then yes there is nothing given other than 40000/- Standard deduction and taken out existing 35K benefits + added 1% educational Cess.

But, if I see as an Indian and want better nation then, I personally believe, most of the things were for middle class in indirect form. We, all Middle class Indians, always believe that budget should be in favour of us by reducing taxes, increase income tax slab and so on so forth.

Is this is really true? Partially yes, we need to get something directly, but this time there is lot for middle class in different form. Let us look by few examples.

As mentioned, don’t look at Budget only from “I” perspective. Look it at as an “Indian” and then see does it serve the purpose of nation? Then, I can guarantee you, your dissatisfaction will reduce or you will also appreciate the efforts of Finance Minister, Mr.Arun Jaitley and his team.

  • Budget document says, 6 Lakh crores will be spent this year on Roads/Railways/Infrastructure and 400+ new airports by 2022. We will benefit more from these, as it will create more jobs and most importantly it will help us to use quality Infra and reach destination quick and safe.
  • One Medical college for every 3 constituencies will be opened via budget allocations; Middle class kids will be most benefited.
  • Number of jobs will increase from investments in digital India infrastructure and digitization of services.
  • Rs 17,000 crores to be spent for Suburban transport in Bangalore and Mumbai alone and most of the passenger are middle class
  • 12,000 Crore on “Health Insurance” that will help Poor to save lives and we are contributing indirectly to this cause by compromising on some tax benefits. Health Insurance is need of hour in India for the bottom of the Pyramid.

Above one are few heavy investments plans in this budget. What I am trying to say, these will create more jobs and it will help the middle class in different forms. We spend avg 2-3 hours on roads, our kids struggle for quality education. Middle class will benefit more by these investments / initiatives.

Direct benefit looks always better, but let the nation or company grow. This time it is not just YOU who get some direct benefit instead a policy introduced that will help the whole nation or company get benefitted through YOU. This govt is working as CEO and CFO so that ‘balance sheet’ is healthy and money is spending properly.

This Budget could have easily said we are increasing Tax slab from 2.5L to 3.0 L which might have brought smiles on our face. But look at bigger picture; we might have not gained anything larger but not lost either. This money will create more jobs as it has been spend on projects. Most importantly, the money is not wasted in the form of “subsidies”. Subsidy has made Indians lazy; instead let all of us work and earn on our own rather than relying on subsidies.

What previous govt has done to get few “votes”, gave away huge amount of subsidies in the form of Farm loan, Petrol, diesel, food and so on. This Govt. instead done proper fiscal maths and invested money on projects that will reduce Below Poverty Line(BPL) population.

Just to bring smile for a day by tax benefits and compromising on Fiscal deficit, might have impacted on Inflation. This would have resulted into giving in one hand and taken out in the form of high prices from other hand (“Ek haat se dena, dusarese lena”). Just to remind, check the inflation rate for the period 2010 to 2012 which was in double digit. Do we really want to go there again for some benefits? I don’t think so.

Lower deficit means safer future from a resultant stable economy. If the government keeps deficit under control we all will get benefit with lower risk.

There were many points/statements raised through our great Media houses to create confusion and headlines like

  • “Modi is robbing our money by imposing LTCG tax on our savings”.
  • “I am being penalised for my past investments”
  • “Middle class is being targeted here”

NO! This is not TRUE,  your past gains are NOT taxed. Contrary to a lot of fluff in media , Long term gains prior to Feb 1st 2018 are completely protected and not taxed even if we sell them today or any other day(E.g- If we have bought shares for Rs 100 on Jan 30th 2017 and the value of share is Rs 500 on 31st Jan 2018, then no need to pay tax on profit of Rs 400 (500-100), we will have to pay tax if the sell value is > 500). Only future Long term Capital Gains (Gains earned post Feb 1st 2018 (LTCG)) will be taxed.

Some experts and channel for their selfishness has created hype and investors already lost 6.5 Lakhs crores, by Sensex falling 1000+ points. Very interesting number, 3.67 Lakh crores, LCGT benefit was claimed in year 16-17. Do you know, more than 3Laks crore out of this was actually claimed by big corporate houses and large investors and not the middle class.

If we say ourselves middle class, then our savings should be in range of 6 Lakhs per annum. Even with 15% returns we consider on 6 Laks, which will be 90K and we redeem our units worth of  1 Lakh, profit is exempted from LTCG tax benefit. Even with this, we have 7 Lakhs at hand, so we can manage our annual expenses easily and avoid LTCG with some smart withdrawals (These withdrawls I am talking in retirement period and not when you are saving. As of today, a retiree can manage family with 7 Lakhs per annum easily; this amount will increase if our fiscal maths remains under control).

So, it is our choice between paying direct taxes or pay indirectly with various leakages / other overheads like interests, weak currency which will translate into higher inflation.

I always welcome your valuable feedback/comments. Thank You!

Leave a Reply

Your email address will not be published. Required fields are marked *