Is the budget over-rated for our personal finances?

By Reuters Staff
July 2, 2009

By iTrust Financial Advisors (
When it comes to our personal finances, the annual budget is not really worth that much attention. Every year expectations build up that major tectonic shifts will happen that will impact our personal finances.

INDIA/This year is no different. In fact, the expectations are even higher given the outcome in the general elections. The usual items populate the wish list of changes that are being talked about by pundits.

Here’s a quick compilation of items, by personal finance category, that could have an impact on our personal finances. But do keep in mind that not all of these could happen, or happen in the magnitude that they are expected to.

Stocks and Trading
Phase out of securities transaction tax and commodities transaction tax. The impact of this could be that trading could become marginally cheaper than what it is today.

Mutual Funds
Nothing major expected here. The big change, not a part of the Budget, was SEBI’s new policy on zero entry loads for mutual funds, i.e., no more fees paid out of our money to sellers of mutual funds.

The Life Insurance Council of India has asked for a separate limit for deduction under Section 80C for long term instruments like insurance. If this were to happen, the impact of this could be that one will get a higher annual amount for your tax deduction.

There is also talk of limiting the service tax on ULIPs to only the fund management charges. If this goes through, the impact will be to reduce the overall charges levied on one’s ULIP.

Home Loans
The annual limit under Section 24 for tax deduction on interest paid on an outstanding home loan is expected go up fro Rs 1.50 lakhs to Rs 2.50 lakhs. This will result in saving of up to approximately Rs 30,000 depending upon one’s marginal income tax rate.

Additionally, there have been strong demands for the deduction to begin as soon as loan repayment begins. Currently, the tax deduction is possible only when the home has been fully constructed.

Small Savings Schemes
The interest rate regime on schemes such as NSC, KVP etc. is expected to be brought in line with the prevailing market rates of interest. A reduction of 0.50% – 0.75% in the rate of return is expected. The impact of this will be that the returns from these small savings schemes will not be that appealing compared to other fixed return instruments such as debt funds, or even bank accounts.

Household Expenses
Petrol and Diesel prices have already gone up by up to 10% as of the announcement on July 1, so the impact on our transport costs will clearly be felt.

Additionally, if LPG subsidies are also changed, they will likely impact our costs of operating our kitchen.
The Budget is clearly a guessing game for policy watchers, so lets see what happens on July 6 and how many items end up impacting our personal finances in a really meaningful way.


SirThis is a great work for public


Rebate in Income Tax on Home Loan Interest, Home loan Instalment, Reduced rate of lending for Home loan upto 30 lacsWhy all benefits to those home seekers who are rich and who can afford repayment of loan worth Rs.30.00 lacs and also margin of 20% needed for loan. Naturally such person must have annual income of at least more than five to 8.00 lac to become eligible for finance of Rs.20.00 lac to Rs.30.000 lacs.Why all types of rebates for such rich class people whereas poor who cannot afford repayment of loan of even Rs.2.00 lac are fully neglected. Obviously rebates are being allowed to win the hearts of real estate developers and home builders.Why not government comes out with affordable housing project for poor and middle class person whose annual income is less than Rs.2.00 lacs. Government has large chunk of land under its control and by the disinvestment proceeds they can acquire land for building small houses at cheaper rates.Similarly there is pressure for reduction in lending rate of interest and why not stress for recovery of bad loans which is rising in momentum every year and which has become a cancer for banking industry. Waiver of loan or compromise settlement with poor and middle class farmer is understandable. But why banks are forced to compromise with willful defaulting industrialists and traders.Until there is culture of recovery supported by government of India, any bank cannot imagine of healthy lending. Bank is therefore forced to opt for parking surplus fund with RBI at 3.5%. After all if a bank goes bankrupt it is the government, which has to infuse capital for its survival. How many times will government provide ventilator to sick bank? Why not defaulters are treated as criminals excluding the case of natural calamity?What is control of disproportionate increase in assets of top bank executives of various banks?Has government any plan to verify the credentials and assets of GM of any bank before promoting him to ED or CMD?There is provision for rural posting for all officers to be promoted to higher scale. Have you ever verified whether banks are using this rural provision for punishing those officers who do not flatter to their bosses?Are all GM or DGM or AGM having rural exposure before his or her promotion?Are banks giving promotion to honest officers or sidelining them as happens in other government departments?What is the need of Interview marks in Promotion marks when bank has tested and attested the services of any officer for more than a decade or two or three. Don’t you agree that interview marks gives scope for manipulation and injudicious promotion to corrupt officers, which give rise to flattery culture?Is there any remedy for officers who are unjustifiably rejected in promotion process?Are banks showing real status of bad loans in their balance sheet?Hiding of NPA or recovery of NPA– which is getting importance in PSBsNet NPA ratio of bank is being projected as less than 1% . Gross NPA ratio is little more. But the question is whether Gross amount of NPA has been increasing every year and whether the same is within control of individual banks, and whether they are capable to monitor bad assets and adequately capacitated to recover the bad loan from bad borrowers. Banks have been showing lesser NPA ratio by increasing total advances of the bank and not by positive recovery from existing bad loan accounts.Are you happy with attractive balance sheets of the bank or you also doubt their correctness as happened in case of Satyam Computers which was awarded twice for best Corporate Governance and which company was rated high by best Credit Rating Agencies of the country.Do you really believe that private banks are not better than PSBs so far as standard of customer service, sincerity of officer working in banks and health of banking assets are concerned? It is possible that CMD of Private banks do not oblige FM or Government of India or RBI governor by reducing lending rates whereas CMD of PSB compete among each other to become front runner in the good book of FM. I remember CMD of Indian bank was considered as the best for more than a decade and government came to senses only when fraud of amount of Rs.1200/ crore was detected.It is desirable to find out as follows:Total advances as on 31.03.2006 with number of borrower accounts( it is assumed that finance made during last three years are standard )Out of which total amount of NPA in how many accountsFinance made in the yearTotal Ac and Total amountOut of which NPA a/c & Amt.200120022003200420052006Out of which written off / sacrificed during the year 2006 –07 , 07-08 and 08-09.Name off officers who sanctioned the loan in the beginning and who subsequently monitored and renewed the same. Then find out the list of those officers whose name appear in more than 100 or 50 or 10 (Benchmark fixed by government) bad accounts.Whether the NPA account has been restructured and if yes why?

Posted by danendra jain | Report as abusive

I just wish 80C limit is hiked so that people get more salary in hand.Also, FDs interest should be made tax-free. This can also help in boosting banks’ deposit base which is good for them.STCG Tax should come down to 10% from the current levels of 15%. I feel 15% is too much to pay on gains on stocks/MFs sold before 1-year.

Posted by Aditya | Report as abusive

Govt should increase the interest exemption for home loans… This will also help realty companies as demand would increase!

Posted by Ranjit | Report as abusive

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