Budget 2023: Key lessons for the common man

The Union Budget 2023, presented by Finance Minister Nirmala Sitharaman, has elicited a positive response from various sections of society, particularly the middle class. The budget offers some significant benefits for the common man, including increased disposable income through tax reductions and a new saving scheme for women. Let’s look at some of the key takeaways from the budget and what you can learn from them.

Educate yourself on the financial forefront

The Finance Minister, in her budget speech today, has highlighted the importance of financial literacy to achieve greater financial security and growth. 

Financial literacy is all about being in control of your finances. It equips you with the knowledge and skills you need to make smart decisions with your money. It also helps you plan for your future and make informed choices about savings and investment plans. Being financially literate is key to avoiding debt and having a solid plan in place for emergencies. It helps bridge the gap between limited resources and growing financial responsibilities, making it an essential life skill.

Adhering to a budget, monitoring spending, and creating and executing a savings and investment plan are vital components in enhancing one's financial literacy. Additionally, understanding the various tax-saving options available under different sections of the Income Tax Act, such as Section 80C, Section 80D, and Section 80E, is also crucial for managing finances better.

Get your taxes in order

In a big relief for the middle class, Sitharaman has announced that no tax would be levied on annual income of up to Rs 7 lakhs under the new tax regime. The government has also increased the tax exemption limits in the new tax regime, as mentioned below:

To maximise the benefits from these proposed changes, it’s important to know about tax-saving methods. Tax saving through insurance is a smart way to reduce your tax liability while securing your future financially. In India, there are various tax-saving insurance plans available, such as life insurance, health insurance, and term insurance.

Life insurance policies provide life cover and help you save taxes under Section 80C of the Income Tax Act. For instance, you can opt for a ULIP (Unit-Linked Insurance Plan), which offers both insurance and investment benefits. The premium paid towards a life insurance policy is eligible for tax deductions of up to Rs 1.5 lakhs under Section 80C.

Health insurance is another way to save taxes, and it offers financial protection against medical expenses. The premium paid towards a health insurance policy is eligible for tax deductions under Section 80D. You can claim a tax deduction of up to Rs 25,000 for self, spouse, and dependent children, and an additional Rs 25,000 for parents who are senior citizens.

Go digital

To enable more Fintech innovative services, FM has announced that the scope of documents available in DigiLocker for individuals will be expanded. 

This much-welcomed move is a sign for more people to opt for digi locker services. One can effortlessly access important documents such as a driving license, PAN card, and insurance policies from any location at any time. This eliminates the need for physical copies, reducing the risk of loss or damage.

Even from an insurance policyholder standpoint, opting for a digi health locker like docprime can be life-changing. One of the biggest challenges faced by people while availing health insurance is the cumbersome process of providing proof of previous medical records and test reports. A digi health locker can make this process much simpler, as all relevant information can be stored and accessed digitally. This will make purchasing and renewing health insurance policies much easier, as insurance companies will have access to a centralized database of medical records.

More power to women 

In an effort to recognise women's need for financial security, FM has announced Mahila Samman Bachat Patra - a one-time small savings scheme for two years up to March 2025. This initiative will offer a deposit facility for women up to Rs 2 lakhs for two years at a fixed interest rate of 7.5% with a partial withdrawal option.

This initiative underscores the need for women to take charge of their finances and invest in good saving options. With increasing financial independence and changing societal norms, women are now playing a greater role in managing household finances and making important financial decisions. By developing a strong understanding of money-related matters, women can secure their future.

Women can consider investing in Public Provident Fund (PPF), a government-backed savings scheme that offers a fixed interest rate of 8%. It is exempt from taxes, making it a popular option for women who want a low-risk investment with a guaranteed return. The annual investment amount of the scheme ranges from Rs 500 to 1.5 lakhs. PPF accounts have a lock-in period of 15 years, making them an ideal option for long-term savings. 

Another popular investment tool for women is National Pension System (NPS), a government-sponsored pension scheme that offers tax benefits and allows women to save for their retirement years. Currently, the rate of interest offered under a PPF investment is 7.1% annually. It’s considered one of the safest investment options for women.