Union Budget 2013 - 14: Time to realign your finances

Rajiv Raj
www.creditvidya.com

It has neither given you much nor has it taken things away from you – that is probably a better way to put Budget 2013-14. It is all about minor tweaking in the rule book and the life does not change much after that. However to put yourself in the best position it is better to realign your finances.
 
Though retail investors and home loan seekers had a long list of wishes, not much came into reality. Though he left tax slabs unchanged, keep aside the surcharge on super-rich club, individuals got a budget gift (read it on the lines of budget holiday) of Rs 2000, if their income is below Rs 5 lakh. Though, many of us were expecting the extant deduction of Rs 150,000 towards the interest paid on your home loan to go up to Rs 300,000, only an increase of Rs 1 lakh is allowed with caveats. This increase is applicable on first home purchase of an individual in FY2013-2014 on home loan amount of Rs 25 lakh. Finance Minister has made it easier to buy your dream home. It is the time to prepare your home loan file, put your documents in place and more important check your CIBIL score too. You stand to benefit more if RBI reduces interest rates on March 19, when it meets for mid quarter monetary policy review.
 
There is a mention of increase in the surcharge on dividend distribution tax from 5 percent to 10 percent. That created some confusion initially on the tax treatment of debt mutual funds. However the fine print made it clear that there won’t be separate categories of liquid fund and non-liquid debt funds. Now there are only two categories of mutual funds – equity funds and non-equity funds. Hence the tax burden on dividends of debt funds has gone up. It is the time to move from dividend plans to growth plans if you are debt fund investor. You can also consider investing in the ongoing public issue of tax free bonds or can also buy tax free bonds on the stock exchanges. While debt becomes bit less attractive, doors are opened bit wider by finance minister to invite you to the world of equities.
 
Extension of Rajiv Gandhi Equity Saving Scheme has been announced. Now individuals with income of Rs 12 lakh too can invest in this scheme as against older norm of Rs 10 lakh income per year. And the scheme is available for next three successive years. So you can invest Rs 50000 in each of these years in specified securities and specified mutual funds.
 
There are concerns over the fiscal deficit and how the finance minister is going to stick to the budget limits on the expenditure side. One cannot rule out a slippage. Inflation can come back at any time and sovereign rating downgrade risk too can surface if fiscal slippages become evident. Hence it is time to keep some money, say around 5 percent, in gold. Though not many of us would like to invest in something that has not done well in last calendar year, look at as portfolio insurance. It should work, when nothing does.

The writer is a Co-founder & Director at  www.creditvidya.com