Budget Effect
As you read this, a group of men and women are locked in the inner recesses of the North Block, which houses the Finance Ministry. Away from their family, friends and media (shudder!!) with no access to the outside world or social media (!!), they are busy giving final touches to a top-secret document—the Union Budget of the country. They will breathe free on February 1, the day of the Big Reveal or Budget Day, as some people call it.
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Why all this hullabaloo, you ask? And, after all, who cares about it anyway?
Well, you should!
That sheaf of papers Finance Minister Nirmala Sitharaman will pull out of her 'bahi-khata’ or ledger on Budget Day will dictate if you can still afford to order in food five times a week, or buy that new iPhone, or a car, or a house. It could be one of the factors that could impact your cryptocurrency investment or even, how much money you get in your account every month.
Yeah! It’s more than just your income tax. Intrigued? Read on to see just why you should care about the Budget.
1. The Budget can 'tax’ you
Yeah, that T-word which gives you sleepless nights every February-March (or November-December, now). The same reason you have to set some money aside to silence your dad/mom/accountant. The Union Budget is where it all happens. Stay tuned till the end (yeah, they save the best for the last) and you will know how much of your salary will go to the government. Injustice, much? Well, here’s why it is needed.
Taxes are a significant source of revenue for the government which it spends on salaries, government schemes and the infrastructure it builds like roads, schools, hospitals etc. While most experts believe that the upcoming Budget may leave the tax rates unchanged, there are some who think the government may hike standard deduction from ₹50,000 to ₹1 lakh. For the uninitiated, standard deduction is a flat exemption that salaried employees can claim on their total income, meaning your tax outgo might just go down… Yay!!
There is also increasing clamour for a WFH allowance or deduction. Yup! So those who invested in a home-office set-up or shelled out for Wi-Fi could benefit… Yay! You might just get an allowance or a deduction. But again, please wait for the Budget. This is merely an expectation!
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₹7.5 lakh – ₹10 lakh |
15% |
₹10 lakh – ₹12.5 lakh |
20% |
₹12.5 lakh – ₹15 lakh |
25% |
> ₹15 lakh |
30% |
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But there are other taxes or 'cess’
Yeah! These little announcements are tucked away through the B-speech, not just at the climax. So, listen carefully for any mention of a 'cess’.
So, what is a cess? It’s a tax by another name. It is often levied for a limited period and the revenue collected is earmarked for a specific purpose. For instance, the 2021 Budget saw the rollout of an Agriculture Infrastructure and Development Cess (AIDC) on petrol and diesel. In plain English, it made fuelling your car or bike a little more expensive.
2. The Budget could make some 'stuff’ you love, pricier or cheaper
That new phone you were eyeing? You should have bought it in that EOSS. Come Budget Day, it could get a tad bit costlier. (Not that we know for sure) But, Budget-watchers also tune in to know what’s gotten cheaper and what will turn more expensive. Though truth be told, that list is getting smaller every year with the rollout of the Goods and Services Tax or GST.
For instance, the 2021 Budget saw custom duties increase on imported items like electronic appliances (mobile phones, y’all) and reduced custom duties on items like gold and silver, making the shiny metals a little cheaper.
The Budget is also sometimes bad news for smokers and all those who like their happy hours, because this is where the government raises the taxes (they call it 'Sin’ Tax) on smokes and alcohol.
But, hang on, the Budget is not only about taxing (pun intended) you. It could also help you plan your investments…. yeah, help you in 'adulting’.
3. The Budget can help you invest
Seasoned investors track Budget announcements to understand the government’s disinvestment plans. In plain English, it means, government’s plans to reduce or exit its stake in a public company. The much-awaited LIC IPO was announced in the 2021 Union Budget.
Some market investors also use the Budget as an exercise of 'follow the leader.’ Put simply, they invest in the same sectors that the Government is pumping money into. In some cases, these bets play out. For instance, the Telecom growth story after the 'Dream Budget’ of 1991 or the IT boom attributed partly to Budget support in the form of eased restrictions on computer hardware and peripherals, introduced in the 1999 Budget. (Oh, we should have told you, these are long-term bets).
In fact, experts are now keenly watching Budget 2022 for any announcement on cryptocurrency. Will profits from the sale of crypto be taxed, who knows? So, there’s yet another reason for you to track the Budget this year.
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4. The Budget impacts how you live
Notice how in the last few years, the bucket list of exotic vacation destinations is getting longer? Spoiler alert - it’s not only because an influencer made it cool on Insta!
Notice how there seem to be roads and flights to almost everywhere? Or that every city, big and small, seems to be getting a metro rail? Mark it down to funds allocated over successive Budgets. Every Budget lays down a detailed plan on its infrastructure spending. Last year’s allocation came to a whopping 1.77 lakh crore. And, what’s better, spending on infrastructure has a trickle-down effect on most sectors and leads to job creation and poverty reduction.
5. The Budget could help you get a job
Well, not everyone. But, the Government via the Budget does its bit to push job creation. It does this by increasing allocation to some sectors like infrastructure or giving sops to industries in a sector or companies of a certain size. Higher spending translates to more work, and more jobs.
Even investors can benefit from increased job creation in sectors that receive additional budgetary allocation. For example, when the government increases spending on urban transportation, companies that are involved in this sector benefit, which augurs well for their investors.
The last few Budgets have also made it easier for start-ups to function, raise money and hire talent. The government has earlier hinted at easing rules to list companies overseas. The upcoming Budget will be keenly watched for any pointers on the same.
6. The Budget could help you help others
Did you know your maid or driver could buy a life insurance cover for ₹2 lakh by paying a one-time premium of ₹330? That was announced in the 2015 Union Budget. Every Budget sees the announcement of numerous welfare schemes. Many of the beneficiaries of these schemes are often unaware of what they are entitled to. If you knew, you could help them.
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