Modi 2.0: 10 policies that affected your savings and investments

Modi 2.0: 10 policies that affected your savings and investments

A year into the second term, how have the Modi government’s decisions impacted your finances? Team Moneycontrol takes stock of some key decisions.

 

It’s been an eventful first year in office for Prime Minister Narendra Modi and his cabinet, sworn in on May 30, 2019, after a thumping win in the General Elections last year. Since then, a series of decisions by the re-elected government has had an impact on our finances.

Here is a handy recap of how money matters have changed across taxes, investments, insurance and loans.

Taxation

 New, but not improved, slab rates

In the first full budget of Modi 2.0 presented in February 2020, finance minister Nirmala Sitharaman introduced a new, optional tax regime. With liberalised slabs and lower tax rates, it was presented as a preferable alternative to the existing system. However, most tax-payers will be better off sticking to the existing current system that offers benefits under section 80C, 80D, standard deduction, house rent allowance and so on. Most popular tax breaks will not be available under the new regime, rendering a switch futile, except for those who detest paperwork or are unable to optimise current tax reliefs. Even for such individuals, it is advisable to make an effort to utilise tax-saver avenues.





“This is one of the biggest taxation measures in recent times, but also one that has left many tax-payers in a quandary. Also, note that senior citizens will not be eligible for the higher basic exemption limit (Rs 3 lakh) available under the existing tax regime,” points out Archit Gupta, Founder and CEO, Cleartax. Not surprisingly, according to SBI Research estimates, less than 10 per cent tax-payers are likely to migrate to the new regime.





Now, pay tax on dividend income





Another dampener in Budget 2020 was the finance minister’s announcement that dividend distribution tax will be abolished; but dividends earned will now be taxable in the hands of investors. For investors who bank on income from dividends, this measure means increased tax as also compliance burden.

 

High salary earners hit

 

The Budget imposed an annual cap of Rs 7.5 lakh on employers’ contribution towards the Employee Provident Fund (EPF), National Pension Scheme (NPS), and approved superannuation funds. Contributions above this limit would now be subject to tax. “This will hurt individuals falling in the higher tax slab, and so will the taxation of dividends in the hands of taxpayers,” says Prableen Bajpai, Founder, FinFix Research & Analytics.

Happy Investing

Source: Moneycintrol.com