Personal finance gets a boost

NEW DELHI: Personal finance for the middle-class has been a clear beneficiary in the Union Budget for 2003-2004.
From April 1, 2004, standard deduction for salaried class will be up to 40 per cent of the salary or Rs 30,000 whichever is lower for income upto Rs five lakh. Above Rs five lakh, the standard deduction will be Rs 20,000. The existing 5 per cent surcharge on personal income tax has also been withdrawn.
Previously, the standard deduction for salaries up to Rs 5 lakh was 20 per cent.Above Rs five lakh, the standard deduction was nil. Income tax exemption limit has been also retained at the present level of Rs 50,000.
The Budget offered a particularly good deal to senior citizens.
Not only the Life Insurance Corporation of India launch a pension fund product, Varisht Bima Yojana, for senior citizens above the age of 55 years, the scheme will carry an attractive nine per cent interest rate. Interest income of up to Rs 1,50,000 will be tax exempt and senior citizens may file self declared tax returns.
The finance minister announced a new pension scheme with equal contribution from employers and the government. This will alleviate social problems arising out of retrenchment and absence of investment products with a long maturity period.
The new health insurance scheme is also a welcome step. From now on, hospitalization charges worth Rs 30,000 will be available to individuals for a payment of only Rs 365 per year. For a family of five, the corresponding premium will be Rs 547.50 per year, while for a family of seven including dependents – the premium will be Rs 750. In the event of death, the family would get Rs 25,000. In a best case scenario, this scheme will have two advantages – provide cheap health insurance to the masses and increase the corpus of general insurance companies.
As far as personal investments are concerned, the major good news was exemption of dividend and dividend distribution tax for one year. Equity based mutual fund schemes are included in this announcement. Even long term capital gains tax has been made tax-exempt. Further, additional deduction for dividend earnings has been raised from Rs 9,000 to Rs 12,000. Now, total deduction under section 80-l would be Rs 15,000 including Rs 3,000 for investment in government securities.
Finance Minister Jaswant Singh acknowledged the rising cost of education as well. From now on education expenses up to Rs 12,000 per two children per family will be entitled to Sec 88 benefit under Income Tax act.
Possibly the only announcement which will see protests from the middle class is the announcement of reduction in interest rates on small savings schemes and public provident fund. From March 1, interest rates will be reduced by one per cent from the existing 9 per cent. For the rich, there was some more bad news in the form of a 10 per cent surcharge on income over Rs 8.5 lakh per year.