Hello Readers!!

The Union Budget for the fiscal year 2021-22 is going to be announced by the honorable finance minister Smt. Nirmala Sitharaman, on 1^st February 2021. 

As the date is approaching people’s hope for some good steps is increasing. After the threat that people’s personal finances and the country’s economy faced in the year 2021, they are hoping for some good incentives that can help them boost their financial savings. They hope that Budget 2021 will have provisions that will aim at enhancing credit supply to the deserving, yet credit-starved segments of our society.

Here’s is a wish list of general people that expresses their wants from the Budget 2021! 

Amendment In Provisions For First-Time Borrowers!

Banks generally sanction loans to people who have a credit score of over 750 and a monthly in-hand income of Rs 35,000 and more. This is not a problem for those who start earning with this salary, but it becomes an obstacle for fresh credit loan applicants and lower-income groups.

In case if these fresh applicants look for microfinance institutions and small finance banks to borrow money, the loan promises become a problem as their cost of credit is too high. Hence, to enhance credit access and increase competition in the credit pricing for these segments, unsecured loans sanctioned to new-to-credit borrowers or below-prime customers should also be included in the priority sector lending target of banks.

Increase 80C Limit To Boost Savings! 

The pandemic resulted in many worse situations, loss of a job, devastated personal finance, a threat to the economy, decrease in employment, all these situations have become hard to handle for many common peoples. Thus, people have expressed their wish to increase the 80C deduction limit of Rs 1.5 lakh to at least Rs 3 lakh.

It is important to note here that the limit of Rs.1.5 lakh in section 80C, was last revised in Budget 2014-15. Thus, it needs to be revised once more. Increasing this limit will incentivize people to save more for their long-term financial health.

Separate Deduction For Home Loans!

As per the current tax regime, the principal repaid on home loans is eligible for deduction under Section 80C, whereas the interest component of up to Rs 2 lakh is eligible for deduction under Section 24b. But the reality of this tax regime is different, simply very less benefit able to common people. With section 80C being already an over-crowded space, many homeowners cannot avail of maximum tax benefit on their home loan principal repayments. Even the limit under Section 24b is not adequate for a large section of home buyers, especially in their initial years of the home loan tenure.

So, what basically people are expecting from this budget, is a separate tax section for home loans, that would have a combined maximum deduction limit of at least Rs 5 lakh for principal and interest paid. This will boost up the interest of home buyers and will help increase the demand in the housing industry.

Deduction For Mf Retirement Plans!

NPS (National Pension Scheme), insurance-linked pension plans, and mutual fund retirement plans, currently these three are the most preferred financial products for retirement planning. All of these three give the benefits over tax as per Section 80C. However, NPS investors benefit from an additional deduction of Rs 50,000 under Section 80CCD (1B). This deduction is over and above the deduction available under Section 80C.

Thus, people are expecting that this Budget 2021, must have provisions for a tax deduction as per Section 80CCD(1B), for retirement plans of mutual funds and insurance pension plans. This will avail a good and wide choice for retirement planning in front of investors. This will also help increase the interest of many investors towards retirement planning financial products.

For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).