Finance Minister Pranab Pranab Da has got the chance to present the budget after a long pause. The last time he presented the budget was at the time of Indira Gandhi. Following are the highlights of the budget being presented by him today in the Parliament.
Budget 2010 - Main Points:
Child Benefit - To be cut by €16 a month (welfare-dependent families not affected)
Social welfare payments - Reduced by 4.1% for those of working age.
Job-seekers Allowance - Reduced for under-25s and in cases where job offers have been refused.
Excise duty on alcohol reduced - 12 cent cut on beer and cider, 14 cent cut on a measure of spirits, 60 cent cut on a bottle of wine (no change in tobacco)
Tiered pay cuts for public servants from 5% for the first €30,000 of salary, all the way up to 15% of total salary for those earning €200,000 or more
Scrappage scheme announced - VRT relief of up to €1,500 on a new low-emission car, for trade-ins at least 10 years old
VAT rate reduced - 21.5% rate dropped to 21%
Small business - Ombudsman to be appointed to review the cases of small businesses that are refused bank loans
Tax exiles - People with a certain level of assets at home and abroad will have to pay €200,000 per year to maintain their Irish passports
Flood relief - More than €70m to be given to help victims and stop future floods
Mortgage interest relief - Extended to 2018 for those who now find themselves in negative equity.National Solidarity Bond aimed at small investors to be launched.
Prescription fee for medical card holders: 50 cent
Public servants' pensions - To be linked to average salary across career, rather than final salary.
Old-age pension - No changes
Discounted rail vouchers to be given to senior citizen tourists to Ireland
Property taxes and water charges are on the cards for next year
The elephant has been synonymous with India from time immemorial, through history, mythology and belief. For decades, the Indian economy, too, came to be likened to an elephant, but in a pejorative, lumbering sense. Today, as the balance of global power shifts to the East, and India is regarded with awe for weathering the financial storm better than most; the elephant analogy is back – but with the positive attributes of size, stability, solidity and strength. With our economy projected to become the second largest in the world, after China and ahead of even the US, there’s a growing sense that we’re riding a quiet but powerful giant, one that needs to be taken care of if we want it to travel far and carry over a billion people on its back. Just as the elephant-god is worshiped by millions as remover of obstacles and bearer of good fortune, our Budgets are awaited with a prayer that they will lead us to a better tomorrow.
The day after the Budget is a good time for a reality check. As the euphoria of tax breaks fades, people are figuring out how much they will actually save. Sure, thanks to the FM's rejig with tax slabs, every individual taxpayer stands to save some money. The higher the tax slab, the more one stands to gain. For example, someone earning Rs 10 lakh a year stands to save around Rs 51,500 per year. However, according to financial advisers, most people are likely to spend the money — just what the FM is hoping for — fuelling consumption by splurging rather than saving it for a future goal. They recommend embarking on a systematic investment plan (SIP) in an equity mutual fund scheme to make better use of the money.
"Unfortunately, most people are going to blow it," says Gaurav Mashruwala, a certified financial planner. "Since the savings would come in small amounts every month, most people won't even notice it. For example, someone in the higher tax bracket won't open an SIP or recurring deposit for Rs 4,000-plus he would save on taxes per month immediately unless he is really particular about money," he adds. D Sundararajan, investment consultant, Trendy Investments, says that "some middle-aged men and those who are close to retirement would try to save the amount, perhaps, to make up for the lost time to build capital."
Both of them are advocates of systematic investment plan of mutual funds, as it allows people to invest money in stocks with regular small investments. "We are only advocating SIPs because of the uncertainties in the global economy. Though we are bullish on equity in the long term, we think the market would be driven by FII flows in the short to medium term," says Sundararajan. "Even if our domestic growth rate is impressive, global problems can keep the market down in the short term," he adds. For young people, he recommends a combination of diversified equity schemes and thematic schemes like infrastructure and power. For slightly older people, large cap-oriented schemes are a safe bet, he says. Make sure to go for a scheme with a consistent performance record of at least three to five years.
Experts warn investors against taking small investments lightly, as it is the only time-tested way to build wealth for a long-term life goal. For example, Rs 5,000 invested in an SIP every month would be worth around Rs 4.43 lakh at the end of five years, if the investment manages to earn around 15% per year.
As for the Rs 20,000 one can invest in infrastructure bonds, experts are waiting for the details — mainly lock-in period and coupon rate — before recommending them. Mashruwala says the bonds are likely to be issued by institutions like REB, Nabard and NHAI and would have a minimum lock-in period of three years. "The coupon rate is likely to be around 5-7%, but returns are likely to be taxed," he says.
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