Budget 2013: 12 Important things for the Middle Class

Finance Minister P Chidambaram in his budget 2013 speech made many announcements that will impact the middle class. While some are meant to make investments lucrative, others such as hike in excise duties will pinch pockets.

Here is a look at 12 important announcements that will impact the middle class:

1) You can look forward to more tax-free bonds in the coming days, as some institutions are expected to raise around Rs 25,000 crore via tax-free bonds in 2012-13. The finance minister has also permitted some institutions to issue tax free bonds in 2013-14 up to Rs 50,000 crore.

2) The hike in income threshold to invest in Rajiv Gandhi Equity Saving Scheme ( RGESS) is good news for new investors to the stock market. Now, those with income of up to Rs 12 lakh can invest in (RGESS). Earlier only those with income of Rs 10 lakh and less could invest in the scheme.

3) If you are taking a housing loan of less than Rs 25 lakh this year, you can claim additional tax break of Rs 1 lakh on interest payment. This is in addition to Rs 1.5 lakh permitted currently.

4) If you have been worried about inflation eating into your long term savings, you should wait for inflation indexed bonds and inflation indexed national security certificates. The details of these instruments will be announced shortly.

5) If you are living in a tier II city and find it difficult to find an insurer near your place, the budget has some good news for you. Insurance companies can open officers in tier II cities without prior permission from Insurance Regulatory and Development Authority.

6) Last year, the finance minister had announced that for life insurance premium to be eligible for deduction under section 80C, the premium should not exceed 10% of the sum assured. This Budget has raised this cap to 15% for policyholders with disabilities. They stand to benefit as life insurers typically charge a higher premium citing higher risk.

7) The finance minister has announced a tax credit of Rs 2,000 for individuals with income of less than Rs 5 lakh. In simple terms, if your tax payable amounts to Rs 10,000, your liability will be limited to Rs 8,000.

8) Securities transaction tax is reduced. STT on mutual fund (MF) and exchange traded fund (ETF) redemptions at fund counters is slashed to 0.001% from 0.25%; STT on MF/ETF purchase and sale on exchanges is reduced from 0.1% to 0.001%, only on the seller.

9) If you are derivative trader in the equities market, you should be happy as STT on futures has come down 0.017% to 0.01 % and if you are derivative trader in commodities market, you have to pay CTT at the same rate applicable to equity futures. There was no CTT earlier.

10) If you are going abroad, here is some good news for you. Duty-free shopping limit is hiked to Rs 50,000 for a male passenger and Rs 1 lakh for a female passenger.

11) Mobile phone prices to go up; the excise duty is hiked to 6% on handsets which costs more than Rs 2,000

12) If you are a service tax evader, you should make use of the new voluntary Compliance Encouragement Scheme announced in the budget. You can file a declaration of service tax due since 1.10.2007 and make the payment in one two instalments before prescribed dates. You don't have to pay interest and penalty and other consequences will be waived.

  Economic Times, New Delhi, 28-02-2013