Last Updated on August 30, 2021 at 4:18 pm
Here are eight lesser-known, but important budget 2018 proposals. I have now updated the three budget articles posted yesterday. Please do have a look:
UPDATE: Equity LTCG Taxation: How much tax do I need to pay? Illustration part 1
Long-Term Capital Gains Taxation from Equity: Examples (Budget 2018-2019)
Budget 2018-2019: Long-Term Capital Gains from Equity to be taxed at 10% – Implications
🔥Secure your future with our Robo-advisory tool trusted by over 3,500 investors and advisors. From effortless retirement planning to funding your children’s biggest dreams, turn your financial goals into reality. 🔥
Subscribe for money management solutions via email! (Link takes you to our email sign-up form) Join 32,000+ readers in our community.
👉 New Tool Alert! NaviPlan: A Privacy-Focused Multi-asset Tracker and Goal Planner 👈
Budget 2018-2019 Major Benefits to Senior Citizens!
1 Credit risk in Ulips, mutual funds (incl NPS) could go up!
In his speech, the finance minister said:
Corporate bonds rated ‘BBB’ or equivalent are investment grade. In India, most regulators permit bonds with the ‘AA’ rating only as eligible for investment. It is now time to move from ‘AA’ to ‘A’ grade ratings. The government and concerned regulators will take necessary action. SEBI will also consider mandating, beginning with large Corporates, to meet about one-fourth of their financing needs from the bond market
I am not sure if debt fund managers would agree about BBB being investment grade! The corporate bond market is not deep and once a bond has been degraded a couple of times, it may be difficult to sell it or “get out money back”. Let us wait and watch where this leads.
2 Merger of PSU general Insurers
Three public sector general insurance companies National Insurance Company Ltd., United India Assurance Company Limited and Oriental India Insurance Company Limited will be merged into a single insurance entity and will be subsequently listed.
General Insurance Corporation of India (GIC Re) and New India Assurance are already listed and now we have this! United India and National Insurance policyholders can expect a steep increase in health insurance premiums!! Oriental premiums were recently hiked by a huge amount.
Why? Because once listed, the shareholders will not allow them to underwrite losses as they have been doing.
3 Want to save tax after selling real estate? Wait for 5 years after buying section 54 EC bonds
It is proposed to rationalise the existing provision relating to investment in capital gain bonds by providing that the exemption shall be available only in respect of long-term capital gains arising out of a sale of immovable property and investment in the bond shall be for a minimum period of 5 year from the existing 3 years.
Earlier you could avoid tax on capital gains from the sale of real estate by buying bonds issued by NHAI or REC (up to 50 Lakh) and holding it for 3 years. Now you will have to do for 5 years.
4 Pensioners can deduct Rs. 40,000 from their taxable income
In order to provide relief to salaried taxpayers, I propose to allow a standard deduction of `40,000/- in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. However, the transport allowance at enhanced rate shall continue to be available to differently abled persons. Also other medical reimbursement benefits in case of hospitalization etc., for all employees shall continue. This decision to allow standard deduction shall significantly benefit the pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses.
It is a small benefit but should be welcomed by pensioners.
5 Those who file income tax returns after the due date will not get the benefit of all the deductions in section IVA Removed. See comment by Gaurav Nayyar below
6 Now all subscribers of the NPS can withdraw up to 40% of the corpus tax free. Earlier only employees could do so.
7 If you have a health insurance policy that provides cover for more than a year, you can claim 80D in each year by dividing the premium over the period. I assume it can be done equally. That is a 10,000 premium over 2 years can be shown as 5,000 each year under 80D. This is my understanding of:
It is proposed to provide that in a case where the premium for health insurance for multiple years has been paid in one year, the deduction shall be allowed proportionately over the years for which the benefit of health insurance is available.
8 It is proposed to provide similar tax regime as available to equity-oriented funds to Fund of Funds investing only in exchange-traded
funds which only invest in listed equity shares of domestic companies.
Pity they should have also included funds that invest in other equity-oriented funds.
Credit: The brilliant Ashal Jauhari (admin, FB group Asan Ideas for Wealth)
Budget 2018 FAQ
1: Should I now sell my equity holdings and re-buy on April 1st 2018?
That would be useless as there would be no additional benefit. The CG up to Jan 31st 2018 is anyway always tax free.
2: Should I book profits up to 1L LTCG each year?
You can (assuming you can calculate it right!), but as far as I am concerned there is no big benefit other as physiological over the long-term. The calculation is pretty complex as the age of each unit or stock has to be taken into account. I will post a simple example in the next post
3: Is NPS better now?
NO! Only 40% of NPS corpus is tax free. Rest is effectively locked up in annuity or taxable as per slab
4: Are ULIPS better now?
Buying Ulips to save tax on equity would be like using chemotherapy to shave our heads (Robin Williams on how Micheal Jackson used painkillers to sleep!
5: Are ELSS funds tax-free on exit?
No. They too are subject to 10% tax on LTCG.
6: What about arbitrage funds now?
When compared to debt funds at least for less than 3Y, they attract less tax. I wil write a detailed post on this. For now, I see nothing against using arbitrage funds
Any more questions or post ideas?
UPDATE: Equity LTCG Taxation: How much tax do I need to pay? Illustration part 1
We are on Google News
Use this button to add freefincal.com as a preferred personal finance source on Google News.
Explore 1,400+ videos on YouTube!
Subscribe to get posts via email!
Join 32,000+ readers and get free money management solutions delivered to your inbox! (Link takes you to our email sign-up form)Join our WhatsApp Channel
Explore our products
🔥Join our community of 9000+ users! 🔥- Use our Robo-advisory Tool to create a complete financial plan! More than 3,500 investors and advisors use this! Use the discount code robo25 for 20% off. Plan your retirement (early, normal, before, and after), plus non-recurring financial goals (such as child education) and recurring financial goals (such as holidays and appliance purchases). The tool helps anyone aged 18 to 80 plan for retirement, plus six non-recurring and four recurring financial goals, with a detailed cash flow summary.
- Our Flagship Course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market conditions! Watch the first lecture for free! One-time payment! No recurring fees! Lifelong access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
- Join the freefincal investor circle! An exclusive space for investors, advisors, fintech employees and students to access financial planning and insurance tools, mutual fund and stock analysis tools, coding strategies and Excel macros for data extraction. 750+ members are now part of our investor circle.
- Increase your income by getting people to pay for your skills! More than 900 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner seeking more clients through online visibility, or a salaried individual looking for side or passive income, we will show you how to do it by showcasing your skills and building a community that trusts and pays you. (Watch the 1st lecture for free). One-time payment! No recurring fees! Lifelong access to videos!
- Portfolio Tracker! Track your mutual funds and stock investments with our Google Sheet!
- We also publish monthly screeners for
Our Podcast: Let's Get Rich With Pattu
On Spotify: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! On Audible: Listen to the Let's Get Rich with Pattu Podcast
Listen to the Let's Get Rich With Pattu podcast on YouTube.
Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
Dr M Pattabiraman giving a lecture
- Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras.
- He has over 14 years of experience publishing news analysis, research and financial product development. He has over 28 years of teaching and research experience. He is also a public speaker and keynote presenter.
- He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.
- Connect with him via @pattufreefincal on X LinkedIn YouTube
- Pattabiraman has co-authored three print books.
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want. 
Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
Feedback from a young reader after reading Chinchu Gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from a young age. The importance of money management and decision-making based on their wants and needs. Very nicely written in simple terms. - Arun.
About freefincal & its content policy
Freefincal is a News Media organisation dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact Information: To get in touch, please use our contact form. (Sponsored posts or paid collaborations will not be entertained.)Our publications
- Your Ultimate Guide to Travel. This is an in-depth exploration of vacation planning, including how to find affordable flights, budget accommodations, and practical travel tips. It also examines the benefits of travelling slowly, both financially and psychologically, with links to relevant web pages and guidance at every step. Get the PDF for Rs 300 (instant download)
- How to profit from content writing: Our ebook is for those interested in getting a side income via content writing. It is available at a 50% discount for Rs. 500 only!