- Date : 01/03/2016
- Read: 5 mins
Budget 2016 is being touted as ‘a budget for the wealthy and the poor’, with the middle class of the country being ignored once again. Get ready to pay more for dinning out, jewelry and movie tickets.
The Finance Minister Mr. Arun Jaitley presented Union Budget 2016 in the Lok Sabha on 29th February 2016.
Based on initial responses, the budget has got mixed reviews from finance experts. Some of them have said the budget is not middle-class friendly and puts more money in the pockets of the rich. However, the budget’s focus on the rural Indian population has been appreciated by many experts. To put the Budget 2016 in perspective, here's a quick rundown on how the union budget will affect your personal budget.
1) Cars are costlier: If buying a car is in your to-do list for this year, the budget doesn’t have good news for you. With the Finance Minister announcing a 1% cess on LPG, CNG and other cars, the prices of all cars are bound to go high. There’s an additional tax of 1% on cars costing above 10 lacs.
2) Eating out and Entertainment becomes costlier: The increase in service tax to 15% (from 14.5%) makes eating out and entertainment even more expensive. Up till now, we were paying 14.5% of service tax, wherein 0.5% was Swach Bharat cess). Now, with the introduction of Krishi Kalyan cess of 0.5%, which comes into effect from June 1, 2016, the leisure budgets of households will increase even further. It would now be 14% (service tax) 0.5% (swach bharat cess) 0.5% (Krishi kalyan cess) = 15%.
3) Cigarettes become costlier: No surprises here as this one has almost become a routine for all budgets. Continuing the legacy of his predecessors, the FM has increased taxes on cigarettes. With the new changes, the cost of cigarettes is expected to go up by 8-9%.
4) Cheers for first time home buyers: First-time home buyers will now get an additional deduction of Rs. 50,000 on interest for loans up to Rs. 35 lakh, provided the cost of their house is not more than Rs 50 lakh. Further, people who don't own a house and don’t get any type of house rent allowance (HRA) from their employer will now be eligible to get a relief of Rs. 60,000 per year under section 80GG, up from Rs. 24,000.
5) Great news for people with incomes less than Rs. 5 lakhs: To lessen the financial burden on people whose annual income is less than INR 5 Lakhs per annum, Mr. Jaitley announced an increase of the tax rebate under Sec 87A of IT Act to Rs. 5,000 from Rs. 2,000. This essentially means that where these individuals were only eligible for a tax rebate up to Rs. 2,000, this can now be up to Rs. 5,000, so they pay less tax. Mr. Jaitley said around 2 crore tax payers would get a relief of Rs 3,000.
6) Internet Routers and TV set-up boxes will become cheaper: Keeping in line with the government's digital India vision, routers, broadband modems, set top boxes, digital video recorders and CCTV cameras are all set to become cheaper than before.
7) Branded Clothes become costlier: Budget 2016 will make looking fashionable and stylish a costlier affair. In the budget, the Finance Minister has announced a 2% excise duty on branded readymade garments and made-up textile articles priced above Rs. 1,000.
8) Bad News for jewellery lovers: Buying jewelry now will dig a deeper hole in your pocket than it used to before with a 1% excise duty on gold and diamond jewelry. Furthermore, beauty parlor trips are also all set to cost more now.
9) Air Travel becomes dearer: The excise duty on Aviation Turbine Fuel (ATF) has been increased to 14% (from 8%), which will make air travel costlier than before.
10) PPF to remain tax-exempt, but EPF interest to attract tax payments: The Budget 2016 has made 60% of interest earned on employee-contributed EPF corpus taxable, for all contributions made by employees after 1st April, 2016. Till now, withdrawal of interest on EPF corpus after 5 years of continuous service was fully tax exempt. The new provisions indicate that if the EPF is not used for buying an annuity then 60% of the interest earned on that portion of the corpus which is built from the employee contributions made after 1st April, 2016, would be taxable.
Other items that will become expensive post Budget 2016 are:
- Water including mineral water
- Aerated water containing added sugar or sweetening matter
- Goods and services above Rs. 2 lacs in cash
- Aluminum foil
- Plastic bags and sacks
- Cable car rides
- Imported imitation jewelry
- Industrial solar water heaters
- Legal services
- Hiring of packers & movers
Items that will become cheaper post Budget 2016 are:
Following is a list items that will turn cheaper:
- Solar lamps
- Hybrid electric vehicles
- Sterilised dialyser used for Kidney treatments
- Low cost houses with less than 60 sq. mt. carpet area
- Hiring of folk artists for performance
- Refrigerated containers
- Pension plans
- Microwave ovens
- Sanitary pads
To know how the Union Budget 2016 will affect your take-home salary, here is: How budget 2016 has affected your take home salary