Skip to main content

Union Budget and Your Financial Plan?

Honorable Financial Minister Piyush Goyal presented this year’s Interim Budget on 1st February 2019. Every Year, on the day of the budget announcement, you can see almost every individual glued on to their Television or mobiles to check the budget updates with much excitement. Sometimes the Budget announcements cheer us and sometimes they make us sad as we think that there are not many benefits being offered for individuals in our tax slab.

Budget is also referred as Annual Financial Statement as it contains an extensive account of the Government’s finances i.e. Government’s revenue and expenditure for the fiscal year. How relevant is this budget when it comes to our personal financial savings? Should we wait for the Budget to be announced and then start our investments or should we do our investments without any relevance to the Budget? Let’s discuss this in detail.

Budget helps in Tax Planning

Budget surely helps in planning the taxes for the next financial year. Budget is presented on 1st of February every year and contains tax proposals to be implemented for the new financial year. For e.g. this year’s budget gave rebate U/S 87 A for taxpayers having taxable income up to Rs. 5 lakh. The Government also announced a rebate for salaried individuals by increasing Standard Deduction from Rs. 40,000 to Rs. 50,000. Such announcements in the Budget help us analyze our financial situation for the next financial year and we can make changes to our financial portfolio accordingly so that we benefit the most post implementation of these tax proposals.

Budget helps in Real Estate Investment Decisions 

In our Country, due to parental and societal pressures, Real Estate is considered as a must-have. Other than buying a property to live in, people also buy real estate for investment purpose as most of us assume that real estate gives the best returns across all asset classes (It is a myth). We also used to get the full tax benefit on the interest portion of the loan repayment of the 2nd house as the buyer could set off the entire loss from house property. This limit got restricted to Rs. 2 lakhs in the Finance Bill 2017.  This year’s budget has again given benefit to the middle-income group by making second self-occupied property tax free (no notional rent) and by extending benefits U/S 54 to two properties (once in a lifetime benefit). Such proposals again bring clarity with regards to our real estate investment decisions for the next financial year.

Budget and Saving Money on Taxable Investments

Budget sometimes also impacts the choice of our investment instruments/products. Until last year there was no Long-Term Capital Gain (LTCG) on Equity shares and Equity Oriented Mutual Funds. But Budget 2018 proposed LTCG of 10% on the gains in excess of Rs. 1 lakh on both of these which made new investors a little wary of the equity investments. Similarly, this year TDS (Tax Deduction at Source) threshold for the banks and post office fixed deposits has been increased from Rs. 10,000/- to Rs. 40,000/- (though the income is not exempt and remains taxable). This might induce some investors to move towards these traditional investments.

The mindset of an investor who is not seasoned enough to understand the benefits of long-term equity investments might get changed once he/she sees Budget proposals which impact his equity investments. But equity investments depend upon many other parameters like tenure of your financial goals, your risk appetite, your risk-taking capacity depending upon your income, etc. Hence, one should not take hasty decisions when it comes to investments.

Budget is not a show stopper when it comes to Investments

Though Budget helps us in deciding upon various investment choices but is it the final deciding factor when it comes to our investments? No, it should not be. Yes, we should make changes to our portfolio as per the budget proposals and do proper tax planning, but stopping our investments or not starting with the investments due to the forthcoming budget is not recommended.

Heraclitus, a pre-Socratic Greek philosopher said, “The only constant in life is Change”. Similar to the changes we face in our lives every day – be it on the personal front or professional front. We should not get hassled by the yearly budget and keep investing as these disciplined investments in accordance to our financial plan and financial goals will take us long way rather than making changes to our portfolio now and then.

Charu Hastir, CFPCM is the founder of Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit:


  1. This is very informative. We all know the importance of Financial Planning but we really don't apply it our lives. Thanks for gearing up.


Post a Comment

Popular posts from this blog

2018: 5 Money Lessons we need to unlearn

I. FD’s are the Best Investments Post Demonetisation Banks have reduced their deposit rates. Following which Fixed Deposits now are not an attractive debt investment option. Moreover, If you fall in 30% Tax Bracket then the return which you will earn from your FD will fall further. II. Time the Markets They Say, Time and Tide waits for none. Well, you can say the same for equity markets as well. So, don’t try to time the market, stay invested for the long term. *Sensex moved from 26595 to 34056 in the year 2017 III. Save only during Tax saving season As Benjamin Franklin rightly said, “You may delay, but time will not.” You should not save only in the Tax saving season, you should invest systematically with discipline at regular intervals. This way you can average out your returns. IV. Rely on your Company Health Insurance Most of us don’t take Personal Health Plan, thinking that our Company covers us. But have we ever thought of a scenario when we ar

What is Financial Planning?

What is Financial Planning? One of my friends came to my place for a cup of coffee and while chatting over how life is going, where is it heading, he told me that his elder daughter wishes to go abroad for her graduation. And when I asked him that how is he planning to fulfill her wish, he just laughed it off saying that her graduation is 10 years away, why should he get worried about it now. This attitude of his made me think about the importance of planning ahead of our financial goals and how many of us are conveniently ignoring this very fact. The Term Financial Planning defines itself as planning your finances well. It is a perfect marriage between your finances and your life goals. Efficiently managing your expenses and savings in order to achieve your future goals is nothing but Financial Planning. What are future goals? They differ from person to person. Some might want to take a luxurious trip abroad and some might wish for own home. But there are few goals which m