What lies ahead for your savings and investments

28 Feb 2006

The budget plays an important role in the way you plan your finances. It decides your investment outlays, your asset allocations and your fund allocations. We tell you how your savings have been hit.

While the budget didn't pull any surprises in the form of new taxes, some promises remain unfulfilled. The much awaited regime of E-E-T or Exempt Tax was promised in last year's budget with no further action in the last fiscal. This time though, most experts believed or rather expected some announcement in that direction. However the Finance Minister kept silent.

Nevertheless, some changes were announced with regard to your other savings such as bank fixed deposits and mutual funds. Pension funds also got the much needed impetus. Here is a handy guide on all your investments tools and how they will be treated this fiscal.

Investment	Budget Impact
National Saving Certificate	PRE BUDGET Lock in: 6 years Tax impact at time of investment: Deduction u/s 80C up to Rs 1 lakh Tax impact on interest/ dividend: Taxed at your respective tax slab Tax impact on withdrawal: Tax free if withdrawn on maturity i.e. after 6 years POST BUDGET Same
Public Provident Fund	PRE BUDGET Lock in: 15 years Tax impact at time of investment: Deduction u/s 80C up to Rs 70,000 Tax impact on interest/ dividend: Taxed at your respective tax slab Tax impact on withdrawal: Tax free if withdrawn after 6 years POST BUDGET Same
Employees Provident Fund	PRE BUDGET Lock in: Till retirement Tax impact at time of investment: Deduction u/s 80C up to Rs 70,000 Tax impact on interest/ dividend: Taxed at your respective tax slab Tax impact on withdrawal: Tax free if withdrawn on retirement POST BUDGET Same
Bank Fixed Deposits	PRE BUDGET Lock in: 5 years Tax impact at time of investment: NIL Tax impact on interest/ dividend: Taxed at your respective tax slab Tax impact on withdrawal: No tax on withdrawal of principal on maturity POST BUDGET Deduction u/s 80C up to Rs 100,000 at the time of investment
Post Office Monthly Income Scheme	PRE BUDGET Lock in: 6 years Tax impact at time of investment: NIL Tax impact on interest/ dividend: Taxed at your respective tax slab Tax impact on withdrawal: No tax on principal on maturity POST BUDGET Same
Equity stocks	PRE BUDGET Lock in: NIL Tax impact at time of investment: NIL Tax impact on interest/ dividend: Dividend tax free in hands of investors Tax impact on withdrawal: Short term capital gains tax @ 10% and Long term capital gains tax is nil POST BUDGET Same
Equity Mutual Fund (other than ELSS)	PRE BUDGET Lock in: NIL Tax impact at time of investment: NIL Tax impact on interest/ dividend: Dividend tax free in hands of investors Tax impact on withdrawal: Short term capital gains tax @ 10% and Long term capital gains tax is nil POST BUDGET Same
Close ended mutual funds	PRE BUDGET Lock in: NIL Tax impact at time of investment: NIL Tax impact on interest/ dividend: Dividend taxed in hands of investor Tax impact on withdrawal: For equity refer equity mutual funds and for debt refer, debt mutual funds POST BUDGET Dividend tax free in hands of investor
ELSS	PRE BUDGET Lock in: 3 years Tax impact at time of investment: Deduction u/s 80C up to Rs 1 lakh. Tax impact on interest/ dividend: Dividend tax free in hands of investors Tax impact on withdrawal: Short term capital gains tax @ 10% and long term capital gains tax is nil POST BUDGET Same
Debt fund/ balanced fund/ Monthly income plan	PRE BUDGET Lock in: NIL Tax impact at time of investment: NIL Tax impact on interest/ dividend: Dividend tax free in hands of investors Tax impact on withdrawal: Short term capital gains tax at your respective tax slab and long term capital gains tax is 20% POST BUDGET Same
Pension policy	PRE BUDGET Lock in: Minimum 5 years Tax impact at time of investment: Deduction u/s 80CCC up to Rs 10,000 Tax impact on interest/ dividend: Annuities are taxed at your respective tax slab Tax impact on withdrawal: 1/3rd withdrawal is tax free POST BUDGET Deduction u/s 80CCC up to Rs 100,000
Traditional Life Insurance Policy	PRE BUDGET Lock in: Minimum 2 years Tax impact at time of investment: Deduction u/s 80C up to Rs 1 lakh Tax impact on interest/ dividend: Bonus tax free Tax impact on withdrawal: Tax free if withdrawn after 2 years POST BUDGET Same
ULIP	PRE BUDGET Lock in: Minimum 2 years Tax impact at time of investment: Deduction u/s 80C up to Rs 1 lakh Tax impact on interest/ dividend: NA Tax impact on withdrawal: Tax free if withdrawn after 2 years POST BUDGET Same
Mediclaim	PRE BUDGET Lock in: Not applicable Tax impact at time of investment: Deduction u/s 80D up to Rs 10,000 Tax impact on interest/ dividend: Not applicable Tax impact on withdrawal: Claim is tax free POST BUDGET Same
RBI saving bonds	PRE BUDGET Lock in: 5 years Tax impact at time of investment: NIL Tax impact on interest/ dividend: Taxable Tax impact on withdrawal: Taxable POST BUDGET Same
Senior citizens scheme	PRE BUDGET Lock in: 5 years Tax impact at time of investment: NIL Tax impact on interest/ dividend: Taxable Tax impact on withdrawal: Taxable POST BUDGET Same

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