Constants & Variables

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Constants & Variables
Constants & Variables
Nidhi Sinha - 05 February 2022

For the Indian middle class, the announcement of the Budget is a personal event. Many big and small decisions depend on how this event affects household budgets.

Families ponder over several issues: will they be able to squeeze out enough from their savings to afford a better education for their children? Will they be able to afford a good hospital in case one of the strains of Covid, nature forbid, does enter their household? Will they be able to increase their protection by keeping aside a little extra every month?

The past few years have been rough, and we were looking up to the Budget to ease some of the pain. The list of expectations was long, from expansion of various tax deductions to Covid-related healthcare incentives, including reduction in the GST rates on health insurance premiums. But to the taxpayers’ dismay, the Budget poured cold water on all such expectations. The government seems to have convinced itself that it has done a favour by “not increasing the tax burden” amid the Covid pain for two straight years.

But the fact of the matter is that you would be left with less in the next financial year even though the income tax slab rates and the deduction limits have remained unchanged. Just take the common assumption of an inflation rate of 6 per cent per year and the value of the money you are left with after paying tax will reduce by that much. So, if you were left with Rs 100 after paying tax, your purchasing capacity will come down to Rs 94.

The government, however, maintained its cautious stance on cryptocurrencies by introducing a 30 per cent tax on returns from all transactions in virtual digital assets. That clearly makes it even more non-competitive with equities. The tax burden on cryptos has tipped the scales in favour of equities, which are already at an advantage. Cryptos are unregulated, extremely volatile, have a complicated cost structure and are still in the evolutionary phase. Apart from presenting that comparison to you, we have also looked at the crypto cost structure in detail. This will give you an idea of not just how it works but also its worth.

In these volatile times, our special story explores whether the balanced advantage mutual funds category fulfils what it promises: to get you the best of both debt and equity. Also, it’s time to check if your health insurance policy is Omicron-ready. If you haven’t reviewed it already, make your protection watertight now.

The Budget may not have changed much for you in terms of easing uncertainty through tax relief, but change you must. Take stock of your cash flows and weed out the extra spends—whether it’s the weekly ritual of eating out or spending on the latest gadgets that hit the market. Also, you may cut and save the income tax guide for 2022-23 that we have prepared for you; it will serve you well for the whole of next financial year.

The constants are in front of you; it’s time to look at the variables of investing and saving within your existing budget.

Nidhi Sinha
Editor­, Outlook Money

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