2020 Budget and tax savings: What you need to know

Amid faltering economic growth, warning bells for consumer confidence and labour market, the Finance Minister has the onerous task of reviving a troubled economy, in front of her. On 1 February 2020, the Finance Minister will present in Parliament the Union Budget 2020. Considering the need to boost consumption, there is a widespread expectation that 2020’s Budget will have something in terms of personal tax cuts. This stems from the idea that tax savings lead to an increase in disposable incomes, which in turn can spur consumption and veer the economic growth off its southward course.

In light of this, here’s what you can expect from Budget 2020 with regards to tax savings.

What is the expectation for income tax reform in the 2020 Budget?

After the corporate tax reform, the expectation is that the 2020 Budget will bring relief to regular taxpayers. This could take the form of:

• An increase in the basic exemption limit to Rs.5 lakhfrom Rs.2.5 lakh
• New tax slabs, such as a 10 per cent rate for those with taxable incomes in excess of Rs.5 lakh, a 20 per cent rate for those with taxable incomes over Rs.10 lakh, and a 30 per cent rate for those with taxable incomes over Rs.20 lakh
• A lowered tax rate for the highest income bracket, from 30 per cent to 25 per cent
• A flat tax rate for taxpayers who forego exemptions
• Reduced long term capital gains and dividend distribution tax
• An increase in the Section 80C threshold limit from Rs.1.5 lakh to Rs.2.5 lakh

How would an income tax relief help the economy?

Relaxations in the income tax structure can help address the demand crisis that the country is currently facing as a reduction in tax outgo implies surplus finance in the hands of the consumer. For demand to witness an uptick, it is hoped that consumers will use this surplus to buy goods and avail services. That said, for consumption to lift demand successfully, the 2020 Budget needs to inspire change that is lasting. After all, apprehensive consumers may not actually spend what’s gained via tax savings.

What should you do with an increased disposable income?

You can utilise the greater disposable income that you may find yourself with in one of two ways. You can either use it in the present to give your finances some breathing room, or use it to create wealth for the future. By parking it in a reliable investment instrument, you can build wealth steadily.

To this end, consider the Bajaj Finance Fixed Deposit. Investing here helps your money grow at an interest rate of up to 8.10 per cent if you are a regular customer, and 8.35 per cent if you are senior citizen. Further, the FD carries CRISIL’s and ICRA’s highest credibility ratings, FAAA and MAAA and so, you don’t have to worry about capital loss or delayed payouts.

You can invest in several FDs via a single cheque, through the Multi-deposit facility, and have each investment mature over a flexible, 12- to 60-month tenor. You can also opt for FD Auto-renewal whilst investing to continue your investment for another term and pick up renewal bonuses on the way.

Consider this table, with figures generated using an FD calculator, to understand how you can grow your disposable income.

Customer type	Deposit amount	Interest rate	Tenor	Maturity value
Regular	Rs.20,00,000	8.10%	3 years	Rs.25,26,429
Regular	Rs.20,00,000	8.10%	5 years	Rs.29,52,286
Senior	Rs.20,00,000	8.35%	3 years	Rs.25,43,998
Senior	Rs.20,00,000	8.35%	5 years	Rs.29,86,583

If you find this FD’s yields impressive, consider that you can invest even as a young earner through monthly contributions of just Rs.5,000 via the Systematic Deposit Plan (SDP) feature. Your earnings grow as per regular FD rates and your contributions, which may be 6–48 in number, are automated via aNACH mandate for added investment ease.

So, keep your eyes peeled for Budget 2020 and what it has to offer you in terms of personal tax savings. Then, book a Bajaj Finance online FD by filling a short form and make the best possible use of your disposable income.