Comments
The Union Budget for FY-13 didn't announce any path-breaking reforms, but there are a host of small steps that will influence your personal finances.
For the common man, while on one hand the Finance Minister has put some extra money in their wallets through income tax exemptions/ raising the tax limits, the increase in service taxes and excise duty will result in rising expenses. Also, with rising crude prices, oil marketing companies will be forced to raise petrol and diesel prices, thereby impacting consumer spends as well as hiking inflation. This may lead to interest rates continuing to remain stubborn.
From an investment perspective, your portfolio would need to undergo some fine-tuning, so that post-inflation returns are good. Let's take a closer look at how the Budget has impacted different asset classes, and what you need to do with your portfolio post the Budget.
IMPACT ON ASSET CLASSES
Gold: Increase in customs duty from 2 per cent to 4 per cent will make the precious metal costlier. To this extent, buying a unit of a gold fund will also become costlier from next fiscal.
Real Estate: The Budget has imposed tax deduction at source (TDS) on transfer of immovable property. This will result in lower profits for investors.
Life Insurance: Service tax increase from 10 per cent to 12 per cent will result in life insurance covers becoming costlier. In addition, one can claim tax deduction under Section 80C only if the premium payable is at least 10 per cent of the sum assured. Besides, the final sum you receive from a policy will be taxable unless your premium is less than 10 per cent for the sum assured. You will, therefore, have to budget for lesser receipts from a policy that doesn't satisfy this.
STOCKS
Rajiv Gandhi Equity Scheme: The Rajiv Gandhi Equity scheme that allows for tax deduction up to Rs 50,000 for investments in direct equities by retail investors with a lock-in period of 3 years, with income less than Rs 10 lakh per annum, will help increase retail participation in equity markets.
Securities Transaction Tax (STT): A reduction from 0.125 per cent to 0.1 per cent in STT will mean lower transaction costs. This will also benefit mutual funds when asset management companies purchase or sell stocks from their fund portfolio.
REVISITING YOUR PORTFOLIO
You may want to allocate a reasonable quantum of your assets into equity stocks, preferably through mutual funds depending upon your risk profile. What you need to keep in mind is that your returns from stocks/ mutual funds can vary a lot, depending on the specific stock/ mutual fund purchased. Make sure that the fund has reasonable number of stocks, and isn't too concentrated. Also, given the uncertainty in the global economic scenario, as well as the difficulties at the domestic level, it is important that you keep a long-term view when investing in your preferred mutual fund scheme.
Even as you focus on equity, you may want to target a certain portion of your assets to fixed income instruments This is because Government borrowing target looks within range, and hence, achievable. As such, you may want to focus on long-term government securities and Monthly Income Plan (MIP).
Queries may be e-mailed to >mf@thehindu.co.in , or sent by post to Business Line, 859- 860, Anna Salai, Chennai 600002).
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.