Budget 2013: What's in it for YOU!

Good news for the first-time homebuyer, stock market investor and individuals wanting to buy insurance in the Union Budget 2013-14, opines Rajiv Raj of CreditVidya.com

Finance minister Palaniappan Chidambaram emphasized that our country's goal is of inclusive growth while presenting his Budget speech for the financial year 2013-14.

Be it the financial support he extended to the handloom weavers or Nirbhaya fund launch for safety of women, or the idea of incorporating an all women bank, each of these caters to the need of inclusive growth.

While walking the tight rope of managing the global investors' expectations, the finance minister did not compromise on the deliverables towards the poor and needy in India. He made it a point that the food security bill remains as a priority.

Interestingly, despite a tightrope walk Chidambaram offered some reasons for India's youth to rejoice.

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

Good news for the salaried

The finance minister has given a tax credit of Rs 2,000 to the taxpayers with income of Rs 5 lakh per year. This will help the youth who have recently become part of India's salaried class.

If this amount -- which wouldn't have been their but for this proposal -- is invested, say in a mutual fund, for three years, it could reap at least 10 to 12 per cent returns at a conservative pace.

Good news for the first time homebuyer

As expected Chidambaram has allowed an additional deduction of Rs 1 lakh per year towards the payment of interest on the home loan taken by individuals in FY2013-2014.

A point to note is this is only for the first time homebuyers taking a home loan of less than Rs 25 lakh. This proposal is a definite incentive to help the aspiring middle class to buy a new home.

It should be a positive for housing finance companies and real estate players offering budget homes.

Unfortunately the existing home loan customers will not benefit from it. But do not lose heart. May be Reserve Bank of India can come to your help.

Low interest rates ahead for borrowers

Reserve Bank of India is scheduled to meet for mid quarter monetary policy review on March 19. And given the quarterly GDP data of 4.5 per cent growth, it is evident that the economy is slowing down. A rate cut looks evident.

Banks too will pass it on to you resulting in lower EMIs on your loan obligations.

If your bank does not do so, do not worry, there are others who would want you as their customer at lower rate of interest, as long as you have a CIBIL score of 750 and above.

Recent guidelines for new banking licenses issued by Reserve Bank of India further encourage competition in the banking sector. More banks mean more competition and more choices for customers which results into an environment conducive to financial inclusion.

Fewer hassles while buying insurance

Finance minister has also made it clear that 'know your client' (KYC) requirement once fulfilled for a bank, are enough to buy an insurance policy.

Such a KYC compliant individual need not go through another such process conducted by insurance company. Thereby Chidambaram has ensured that one gets financial security with less procedural issues.

The FM has also allowed banks to act as an insurance broker. Now banks can sell insurance of multiple insurance companies, instead of just one company today. This further increases number of options for customers and help them move ahead in the financial world.

More opportunities to invest in stocks

He is keen to facilitate the entry and growth of individuals in the financial world. Extension and liberalisation of Rajiv Gandhi Equity Saving Scheme is another step in this direction.

Now individuals with income of Rs 12 lakh too can invest in this scheme as against the older norm of Rs 10 lakh income per year.

Taxing the rich

The direct tax proposals toe the same line of striking a balance. He has taxed the super rich even as Chidambaram did not levy any extra taxes to burden the salaried individuals.

He has introduced a surcharge of 10 per cent on assesses with income more than Rs 1 crore per year. This may not be too pinching for the affluent taxpayers.

Though many critiques have been vocal about the possibility of fiscal slippages, lack of will to drive India on the road towards the economic super power status, political mandate to please all segments of the society, too much emphasis on disinvestment proceeds; one cannot ignore this budget as it is a meaningful step towards financial inclusion. The implementation of the plan by sticking to the budgeted expenditure holds the key.