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4 Budget 2017 announcements that did not appear in FM’s speech
Every curious investor may have been hooked on to the TV (or laptop, if you are tech-savvy) to listen to the Finance Minister’s Budget 2017 speech. And why not? It is one of the most important events in any given year.
However, not every change or estimate finds a place in the FM’s speech. It can be found in the Finance Bill and other Budget documents.
Here are 4 important announcements that weren’t mentioned in the speech:
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Rs 3 lakh limit on cash transactions
It was one of the biggest announcements. The government disallowed any cash transaction over Rs 3 lakh. But, it was not clear whether it was for a single transaction, many transactions, or those conducted over a certain period of time. Here’s the clarity: the limit on cash transactions applies on a per event/occasion basis from one individual. So, it does not matter whether you conduct one transaction or many transactions. What matters is that it is for one specific payment like buying a car or jewellery. Then, the cash you can legitimately pay is Rs 3 lakh. And in case you exceed this amount, the receiver will be penalised by the same amount. This should discourage people from asking for higher cash payments. Also, the government has not announced a limit of sum total of cash transactions you conduct in a year. Meaning, you can have many transactions of Rs 3 lakh for different reasons – one to buy a house, one to pay your insurance premium, etc.
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Rs 2,000 limit on cash donations:
Almost every post-budget talk mentioned about the Rs 2,000 limit on cash donations to political parties. What was not made clear in the Budget is that this is only for tax purposes. There is no actual ban on cash donations over Rs 2,000. Only the amount of tax deduction you claim for the donation has been limited to Rs 2,000. Also, this applies to all charitable and non-profit organisations, not just political parties.
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Long-term Capital Gains Tax on share transfer:
If you hold stocks for over a year, you do not have to pay any tax on the profits you make. This applied to stocks you may have purchased off the stock exchange too. The government has now tied it to the payment of Securities Transaction Tax. If you failed to pay STT while purchasing stocks, you cannot claim the 0% LTCG tax. This means all stocks purchased off the exchange or given as gifts could attract LTCG tax.
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Reduction in tax rebate:
The government offers an extra tax rebate of Rs 5,000 if you earn a taxable income of up to Rs 5 lakh. This mean, if your tax payment was anywhere less than Rs 5,000, you paid zero tax after the rebate. This rebate is now Rs 2,500. Also, it only applies to those earning a taxable income of Rs 3.5 lakh. This could affect those who earn between Rs 3.5 lakh and Rs 5 lakh. It reduces some of the gains you get from the lowered income tax rate of 5%.
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11%
The Finance Minister announced a 25% rise in capital expenditure for the coming financial year. But, the fine print suggests that the government will only pay 11% more from its pocket for capital expenditure. The remaining will actually come from market borrowings.
