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The Budget and your pocket!

February 28, 2006 19:44 IST
Last Updated: February 28, 2006 19:55 IST


The budget plays an important role in the way you plan your finances. We tell you how your savings have been hit.

The Budget plays an important role in the way you plan your finances. It decides your investment outlays, your asset allocations and your fund allocations. We tell you how your savings have been hit.

While the Budget didn't pull any surprises in the form of new taxes, some promises remain unfulfilled. The much awaited regime of E-E-T or Exempt Exempt Tax was promised in last year's budget with no further action in the last fiscal.

This time though, most experts believed or rather expected some announcement in that direction. However the finance minister kept silent.

Nevertheless, some changes were announced with regard to your other savings such as bank fixed deposits and mutual funds. Pension funds also got the much needed impetus.

Here is a handy guide on all your investments tools and how they will be treated this fiscal.

Investment

Budget Impact

National Saving Certificate

PRE BUDGET

Lock in: 6 years

Tax impact at time of investment: Deduction u/s 80C up to Rs 1 lakh

Tax impact on interest/ dividend: Taxed at your respective tax slab

Tax impact on withdrawal: Tax free if withdrawn on maturity i.e. after 6 years

POST BUDGET

Same

Public Provident Fund

PRE BUDGET

Lock in: 15 years

Tax impact at time of investment: Deduction u/s 80C up to Rs 70,000

Tax impact on interest/ dividend: Taxed at your respective tax slab

Tax impact on withdrawal: Tax free if withdrawn after 6 years

POST BUDGET

Same

Employees Provident Fund

PRE BUDGET

Lock in: Till retirement

Tax impact at time of investment: Deduction u/s 80C up to Rs 70,000

Tax impact on interest/ dividend: Taxed at your respective tax slab

Tax impact on withdrawal: Tax free if withdrawn on retirement

POST BUDGET

Same

Bank Fixed Deposits

PRE BUDGET

Lock in: 5 years

Tax impact at time of investment: NIL

Tax impact on interest/ dividend: Taxed at your respective tax slab

Tax impact on withdrawal: No tax on withdrawal of principal on maturity

POST BUDGET

Deduction u/s 80C up to Rs 100,000 at the time of investment

Post Office Monthly Income Scheme

PRE BUDGET

Lock in: 6 years

Tax impact at time of investment: NIL

Tax impact on interest/ dividend: Taxed at your respective tax slab

Tax impact on withdrawal: No tax on principal on maturity

POST BUDGET

Same

Equity stocks

PRE BUDGET

Lock in: NIL

Tax impact at time of investment: NIL

Tax impact on interest/ dividend: Dividend tax free in hands of investors

Tax impact on withdrawal: Short term capital gains tax @ 10%

and Long term capital gains tax is nil

POST BUDGET

Same

Equity Mutual Fund (other than ELSS)

PRE BUDGET

Lock in: NIL

Tax impact at time of investment: NIL

Tax impact on interest/ dividend: Dividend tax free in hands of investors

Tax impact on withdrawal: Short term capital gains tax @ 10% and Long term capital gains tax is nil

POST BUDGET

Same

Close ended mutual funds

PRE BUDGET

Lock in: NIL

Tax impact at time of investment: NIL

Tax impact on interest/ dividend: Dividend taxed in hands of investor

Tax impact on withdrawal: For equity refer equity mutual funds

and for debt refer, debt mutual funds

POST BUDGET

Dividend tax free in hands of investor

ELSS

PRE BUDGET

Lock in: 3 years

Tax impact at time of investment: Deduction u/s 80C up to Rs 1 lakh.

Tax impact on interest/ dividend: Dividend tax free in hands of investors

Tax impact on withdrawal: Short term capital gains tax @ 10% and long term capital gains tax is nil

POST BUDGET

Same

Debt fund/ balanced fund/ Monthly income plan

PRE BUDGET

Lock in: NIL

Tax impact at time of investment: NIL

Tax impact on interest/ dividend: Dividend tax free in hands of investors

Tax impact on withdrawal: Short term capital gains tax at your respective tax slab and long term capital gains tax is 20%

POST BUDGET

Same

Pension policy

PRE BUDGET

Lock in: Minimum 5 years

Tax impact at time of investment: Deduction u/s 80CCC up to Rs 10,000

Tax impact on interest/ dividend: Annuities are taxed at your respective tax slab

Tax impact on withdrawal: 1/3rd withdrawal is tax free

POST BUDGET

Deduction u/s 80CCC up to Rs 100,000

Traditional Life Insurance Policy

PRE BUDGET

Lock in: Minimum 2 years

Tax impact at time of investment: Deduction u/s 80C up to Rs 1 lakh

Tax impact on interest/ dividend: Bonus tax free

Tax impact on withdrawal: Tax free if withdrawn after 2 years

POST BUDGET

Same

ULIP

PRE BUDGET

Lock in: Minimum 2 years

Tax impact at time of investment: Deduction u/s 80C up to Rs 1 lakh

Tax impact on interest/ dividend: NA

Tax impact on withdrawal: Tax free if withdrawn after 2 years

POST BUDGET

Same

Mediclaim

PRE BUDGET

Lock in: Not applicable

Tax impact at time of investment: Deduction u/s 80D up to Rs 10,000

Tax impact on interest/ dividend: Not applicable

Tax impact on withdrawal: Claim is tax free

POST BUDGET

Same

RBI saving bonds

PRE BUDGET

Lock in: 5 years

Tax impact at time of investment: NIL

Tax impact on interest/ dividend: Taxable

Tax impact on withdrawal: Taxable

POST BUDGET

Same

Senior citizens scheme

PRE BUDGET

Lock in: 5 years

Tax impact at time of investment: NIL

Tax impact on interest/ dividend: Taxable

Tax impact on withdrawal: Taxable

POST BUDGET

Same



Complete Coverage: Budget 2006 - 2007

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