The Narendra Modi government came to power with a promise of radical economic reforms. As the government completes two years in office, we list 10 steps taken by the Centre that have made a difference to you as an investor.
1. The Sukanya scheme
Introduced in 2014, the Sukanya Samriddhi Yojana is by far the best conservative debt investment scheme available today for parents with daughters below 10 years. At 8.6%, the scheme gives the highest returns among all small savings instruments. The scheme also provides tax benefits under Section 80C. Since it is a long-term product with a lock-in of 15 years, it instils discipline and promotes goal-based savings
2. More deduction on NPS
To promote long-term retirement savings, the government introduced an additional Rs 50,000 deduction for investments made in the National Pension System.
3. NPS withdrawal reforms
In this year's Budget , the government proposed making 40% of NPS withdrawals at maturity tax-free. It is mandatory to put at least 40% of the corpus in an annuity plan. The investor can now make the maturity corpus completely tax-free by putting 60% in annuity and withdrawing 40% of the corpus.
4. Real estate reforms
The Real Estate Regulatory Act is expected to bring order and transparency in the sector. The Act allows the setting up of an apex body to regulate all real estate activity in the country and protect home buyers from fraudulent developers.
5. More tax benefits for home buyers
The government announced tax incentives for affordable housing projects and an additional Rs 50,000 deduction on home loans, where the value of the property is less than Rs 50 lakh and home loan is less than Rs 35 lakh. The government also extended the completion deadline criteria for claiming deductions on home loans. Earlier, tax relief on interest payment on home loan was claimable only if the construction was completed within three years from the end of the fiscal in which the loan was availed. Now the deadline is five years.
6. Increase in tax deduction limits
The government hiked the exemption limit for investments by individuals under Sec 80C from Rs 1 lakh to Rs 1.5 lakh. The government also increased the investment limit under PPF to Rs 1.5 lakh. In Budget 2015, the FM revised health insurance premium deduction for senior citizens from Rs 20,000 to Rs 25,000. However, change in debt fund taxation rules disappointed. Budget 2014 hiked the tenure for applicability of LTCG on debt funds on redemption to 3 years.
7. Gold schemes
Two schemes—Sovereign Gold Bond and Gold Monetisation Scheme (GMS)—were launched in 2015. Under the bond scheme, investors earn 2.75% interest per annum, while the monetisation scheme offers an interest up to 2.5% on gold deposits. These returns are linked to the price of gold. Assuming that gold prices rise by 5%, the bonds will yield an annualised return of 7.75% and the deposit scheme will give a return of 7.50%. Budget 2016 added more sheen to the bonds by exempting them from capital gains tax at the time of redemption. Interest and capital gains from the gold monetisation scheme were also made tax-free.
8. Small savings schemes rates revision
The government decided to revise interest rates on small savings schemes like PPF, EPF, NSC and other post office savings schemes on a quarterly basis. This did not go down well with conservative investors who invest in such schemes for fixed and predictable returns.
9. Pension plans
Social security schemes such as Atal Pension Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana (life insurance) and Pradhan Mantri Suraksha Bima Yojana (accident insurance) are great ways to secure the lives of your staff.
10. LPG subsidy
The government rolled out Aadhaar-bank account linkage and direct benefit transfer of LPG subsidies. It also restricted subsidies to those who earn less than Rs 10 lakh per annum.
Source : The Economic Times
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