How should I modify my investment strategy after budget 2024?

Last Updated on July 25, 2024 at 5:21 pm

Many readers have asked us how they should modify their investment strategy after 2024.

Some of the critical aspects of budget 2024 that will affect no-so-rich investors are:

• Tax on equity investments has increased from 10% to 12.5%. The increase of the Rs 1 lakh tax-free limit to Rs. 1.25 is largely inconsequential.
• Share buybacks will be taxed as a dividend instead of being tax-free (company was paying 20% tax)
• Real estate sales will incur heavy taxes as indexation benefits are gone. See Budget 2024: Real Estate Taxation Change Can Significantly Increase Tax Burden!
• The tax on international FOFs, gold/silver funds, physical gold, unlisted bonds, and overseas equity/bonds has been reduced from either the slab rate or 20% to 12.5%. See: Budget 2024 Capital Gains Taxation Guide
• NPS Employer contribution has a deduction of up to 14% in the new tax regime
• New tax regime slabs have been made more favourable, and it is harder for the old tax regime to beat them. See Budget 2024: New Tax Regime vs Old Tax Regime Calculator: Check which is better.

We have the following recommendations.

• Get rid of the tax-saving mode and choose the new tax regime.
• Equity investing is essential for long-term goals. So do not fear the higher tax. Create a proper financial plan with a clear asset allocation schedule and stick to it like a robot.
• Avoid share buybacks if you are into direct equity (not necessary).
• If you must sell real estate for some reason and have no place to buy another property, pay the higher tax without worrying too much. Remember, you need the money; a little less is better than nothing.
• Just because some products (as mentioned above) are taxed favourably now, do not go overboard on them. The more types of products you have in your portfolio, the harder it becomes to manage them. There is no need for any additional goal exposure. You do not need international FOFs, etc.
• Do not lock up any or more of your money in NPS just because you have to pay a little less tax. Stay away from Corporate NPS, if You Wish to Retire ASAP!

A change in taxation should never change your core strategy. We will have to accept the higher tax and move on. Focus on the big picture – becoming multi-crorepatis.