Decoding budget documents: How to zero in on tax changes that affect you

Wait for full budget to be presented before incorporating relevant changes into your financial and tax planning for next year

Finance Minister Nirmala Sitharaman will present the Union Budget 2024–25 today, February 1. It will be an interim budget; the full budget for this financial year will be presented by the new government formed after the general election.
 

The Union Budget offers an account of the government’s finances. It provides a statement of the estimated revenue and expenses for the upcoming year. It includes the actual financial data for the preceding year and an estimate for the forthcoming year, along with tax proposals. The Budget is divided into a revenue budget and a capital budget.

The speech: The finance minister’s speech is divided into Part A and Part B. Part A summarises the state of the economy and also provides an estimate for the coming fiscal year. Maneet Pal Singh, partner, I.P. Pasricha & Co, says, “Part B highlights the government’s tax proposals for the next financial year and has a direct bearing on citizens’ personal finances. It should be read with the Finance Bill, which contains the legal provisions.”

Memorandum: The memorandum explains the rationale for various fiscal decisions contained in the Finance Bill. These could include modifications to taxes. It also clarifies the implications of various proposals on various stakeholders.   

The memorandum also has information on the items whose customs duty or other tax rates have changed. These changes could impact the cost of goods or services you purchase.

Finance Bill: It contains the proposals to amend taxes or existing tax structure (if needed) and provides the legal backing for them. After receiving approval from the Lok Sabha, it becomes the Finance Act. One must in particular look at the tax tables in the finance bill.
 

Railway Budget: The Railway budget has been merged with the general budget. People can find information in this portion on changes in passenger and freight fares, new trains and routes introduced, and so on. Next, let us turn to what different categories of people should watch out for.
 

Taxpayers
 

Taxpayers should focus on the income-tax-related changes. Pratyush Miglani, managing partner, MVAC Advocates & Consultants, says, “Keep an eye on alterations in income-tax slabs, exemptions, and deductions. Additionally, changes in indirect taxes, such as goods and services (GST) rates, may influence day-to-day expenses.”
 

Investors
 

They should focus on measures that can affect the financial markets, including changes in capital gains tax, corporate tax rates, and policies related to foreign direct investment (FDI). Miglani says, “Government initiatives to boost specific sectors might present investment opportunities, while alterations in taxation could impact returns on investments.”

 

Adds Rashmi Deshpande, founder, Fountainhead Legal, “Government spending, regulations governing foreign investments, and central schemes may also affect the investor community. A positive change in slab rates may leave individual investors with more cash to invest in equities, mutual funds, or government bonds.”
 

Senior citizens
 

Seniors will find the section that covers direct taxes most relevant. Ritika Nayyar, partner, Singhania & Co., says, “It will help them track changes in personal income tax rates, changes in tax slabs, or any benefit extended to them, either in terms of an increase in tax deductions helping them save more on taxes, exemptions from some harsh provisions or compliance, etc., thereby providing them with more ease and flexibility at their age.”
 

Seniors should watch out for tax concessions extended to the National Pension System (NPS). Rajarshi Dasgupta, executive director and national head of Tax, AQUILAW, says, “The Pension Fund Regulatory and Development Authority (PFRDA) is pushing for parity with the Employees’ Provident Fund Office (EPFO) regarding taxation on employer contributions.”
 

Consumers and homemakers
 

Consumers could be offered some sweeteners. Singh says, “Part B might include initiatives to control inflation, regulate prices of essential goods, or introduce consumer-friendly policies.” Anant Singh Ubeja, senior associate, SKV Law Offices, says:  “Homemakers may find information on subsidies, income-tax implications, and initiatives supporting women’s economic empowerment.”