Investors to face some small changes after Budget 2013-14

Investors will witness some incremental changes as far as their investment plans are concerned in the coming financial year following the announcement of the Union Budget 2013-14. These will not mean a major deviation from their existing plans though they will be able to make use of some additional options in their investment mix.

One bit of good news is that the investors will have a choice of tax free infrastructure bonds for one more year as there has been a permission given for the issuance of these bonds. The individual can choose this as a long term option for parking their funds for 10 to 15 years and this will not have an adverse tax impact because of the fact that the income will be tax free in their hands.

The Rajiv Gandhi Equity Savings Scheme (RGESS) has also witnessed some small changes wherein the income limit for being eligible for the scheme has been raised to Rs 12 lakh. At the same time the benefit can be claimed over a period of three years as compared to the one year time period that exists currently which means that the investor can actually phase out their investments to suit their requirements. The choice of instruments in the scheme has also been increased as equity oriented funds have been included in the eligible list of investments which will help the investor to choose a fund as per their liking.

On the house property front there is an attempt to encourage first time investors through a higher deduction that will be available for repayment of interest on housing loans. For a first time buyer if the value of the property is Rs 40 lakh or less and if the housing loan is Rs 25 lakh or lower then an additional deduction of Rs 1 lakh would be available over and above the existing Rs 1.5 lakh deduction. Once again this can be easily claimed because of the fact that is can be taken over a two year time period.

However the provision for a tax deducted at source at the time of sale of the house property if the value of this is Rs 50 lakh or higher would be a negative. This would increase the burden on the individual in terms of compliance and effort in deducting and depositing the tax with the government.

There will also be a better option available for those who want to protect their real rate of return because there will be the introduction of inflation linked bonds and inflation linked National Savings Certificates. Conservative investors as well as senior citizens can make use of this opportunity when it becomes available. This will ensure that the interest rates earned by the investor moves along with the changes in the overall interest rates and hence there is protection in times when inflation rises in the economy.

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