Understanding Budget documents: Identify changes relevant to your finances

The July 2024 Budget changed little for taxpayers, heightening expectations for relief this year

Finance Minister Nirmala Sitharaman will present the Union Budget on February 1. Understanding the Budget is crucial as it directly impacts financial well-being.

 

The Budget outlines government revenues, expenditures and tax policies. “It impacts inflation and purchasing power, which in turn influence savings and consumption, crucial for financial decision-making,” says Raghvendra Nath, managing director, Ladderup Wealth Management.

 

Key budget documents

 

After the Minister’s speech, the Budget documents become available on a website (www.indiabudget.gov.in) and at the Union Budget Mobile App.

 

The speech is divided into Part A and Part B. Part A focuses on schemes, macroeconomic indicators and major announcements. Part B outlines direct and indirect tax policies. “Part A sets the policy direction for economic growth, while Part B focuses on taxation and fiscal measures that impact businesses and taxpayers,” says Suresh Surana, a chartered accountant in Mumbai.

 

Nath emphasises checking the Budget ‘highlights’ section summarising sector priorities, deficits, and financial allocations.

 

Taxpayers

 

According to Abhishek Kumar, a Securities and Exchange Board of India (Sebi) registered investment adviser and founder of SahajMoney.com, tax-related changes can be found in the direct taxes section of the speech or highlights.

 

Minimal changes in the July 2024 Budget have heightened expectations for tax relief this year.

 

“The upcoming Budget should focus on simplifying the tax structure for individual taxpayers by consolidating the current dual regimes into a single, cohesive framework,” says Deepashree Shetty, partner, global employer services, tax and regulatory services, BDO India.

 

Look at Part B of the speech to see how much tax will be saved or levied.

 

Investors

 

Changes in debt, fiscal deficits and regulations can impact sector performance and investment opportunities. “New subsidies, incentives, or public-private partnerships may present opportunities,” says Surana.

 

Watch for changes to capital gains tax rules. “Look for amendments to important sections like Sections 2(14), 2(42A), 45, 47, 54F, 111A, 112A, 112, 50CA, 74, 50D, etc.,” says Naveen Wadhwa, vice-president, Taxmann.

 

The Association of Mutual Funds in India (Amfi) expects measures that restore indexation benefits, rationalise capital gains taxes, and introduce a debt-linked savings scheme to boost long-term savings and develop the bond market.

 

Insurance buyers

 

Insurance buyers should look out for updates on coverage, consumer protection, tax incentives, and premium rates.

 

“Changes in the scope of coverage, such as new benefits or exclusions, should be monitored, as well as reforms in health insurance markets,” says Surana.

 

“Look for amendments to sections like 2(14), 10(10D), 194D, 194DA, 80D, 80C, 80DD, 80DDB, and 56(2)(xiii),” says Wadhwa.

 

Insurance leaders are optimistic. “Measures such as tax incentives for policyholders under Section 80D and reduction of GST on health insurance premiums while retaining input tax credit can help increase insurance penetration,” says Gaurav Parasrampuria, chief financial officer (CEO), Magma General Insurance.

 

Some experts are of the view that tax deductions on insurance should be separated from Section 80C. “A separate deduction limit for insurance premiums under Section 80C could enhance access and affordability,” says Jude Gomes, managing director and CEO, Ageas Federal Life Insurance.

 

Consumers

 

Budget provisions can affect the cost of goods. “Look for what will become costly and cheaper in Part B of the speech that deals with indirect taxes,” says Wadhwa.

 

Senior citizens

 

Senior citizens should focus on changes to social security benefits, healthcare funding, and senior care services.

 

“Senior citizens should keep a tab on tax relief or deductions for them, affordable housing initiatives, and inflation control measures,” says Surana.

 

Incentivising pension products is vital. “Aligning tax deduction of life insurance annuity products with the National Pension System (NPS) and addressing tax on the principal component of annuity can meet retirement needs effectively,” says Tarun Chugh, managing director and CEO, Bajaj Allianz Life.

 

Dos and don’ts

 

Check figures in the annexure, as the speech simplifies them. Also, compare figures with previous Budgets to understand trends in tax rates, fiscal deficit targets, and spending patterns.

 

Don’t try to understand all the documents at once. “Start with the highlights, as they cover the most important aspects of the Budget relevant for a layperson,” says Kumar.

 

What key Budget documents contain

 

*  Budget Highlights: Key policy changes and fiscal proposals

*  Budget Speech: Government’s priorities, economic outlook, and policy plans

*  Finance Bill 2025: Proposed amendments to income tax, GST, and customs

*  Notes on Clauses: Explanation of amendments in the Finance Bill

*  Memorandum: Rationale and impact of proposed changes

*  Budget Notifications: Official clarifications and implementation updates

 

  Source: Taxmann