How to get maximum benefit out of Budget of 2014?
Budget of 2014 is released now. There are several positive and negative factors for employees, businessmen and investors. In this article I would help you to analyze some of these budget 2014 highlights and how you can benefit maximum out of it. I would also highlight which sectors you can look for investment.
How to get maximum benefit out of Budget of 2014?
1) PPF increased from Rs 1 lakh to Rs 1.5 lakhs:
In budget 2014 investment in PPF has been increased from Rs 1 lakh to Rs 1.5 Lakhs from this financial year. Investment in PPF is a good way to plan for child education plan, daughter marriage, retirement etc. apart from earning tax free income. If you can plan well by investing Rs 1.5 Lakhs by the 5th of April, you can earn higher tax free income in a year.
Read: How to earn highest interest from Public Provident Fund (PPF)?
2) 80C limit increased from Rs 1 lakh to Rs 1.5 lakhs
In this budget, income tax 80C exemption increased from Rs 1 lakh to Rs 1.5 lakhs. Under 80C any amount invested in insurance, PPF, NSC, ELSS, ULIPS etc. are eligible for deductions. While all the options are good, you can bet for better returns from PPF and ELSS. PPF is a good option to earn 8.75% tax free interest, which has a lock-in period of 15 years. This is good for low risk investors. Coming to ELSS mutual funds, these are a medium risk investment option which can help you to earn 12% to 15% returns per year. This has 3 year lock-in period.
3) Housing loan interest exemption increased from Rs 1.5 Lakhs to Rs 2 Lakhs
This is a good news for everyone who are planning for or taken home loan. Interest from the home loan exemption has now increased to Rs 2 Lakhs per annum, i.e. Rs 16,667 interest would be exempted per month. If you can plan well by taking 30 years home loan tenure from the cheapest home loan provider, you can take maximum benefit from this.
4) Invest in infrastructure and banking Sector stocks / mutual funds
It was not surprising that the new Government have provided preference to infrastructure sector in the Budget. It has allocated Rs 2 lakhs Crores to spend in infrastructure sector. This is 25% higher compared to previous years. We should invest in infrastructure and banking sector stocks and mutual funds to get good returns in next 3 to 5 years. Apart from this you can directly purchase stocks like ACC, L&T, Ultra Tech and JP Associates which would benefit. Housing loan exemption limit increase could benefit to LICHFL, HDFC etc. where you can look to purchase such stocks.
5) Invest in specific stocks of consumptions
Budget helped in reducing the prices of consumptions like television, telephone, refrigerators, footwear etc. This way consumptions will boost. Invest in stocks that deal with such business. Excise cut on footwear could benefit Bata India, etc. which could be a good bet.
6) Invest in specific stocks of insurance and defense sector
In budget, there is an increase in FDI in insurance and defense sector and opens doors wider to foreign investors in the Indian debt market. Financial markets are expected to boost. You should invest in insurance and defense stocks.
7) Incentives for introduction of REIT's
In this budget, the government has given the necessary incentives for the introduction of REITS (Real Estate Investment Trusts). This is going to increase valuations in the real estate industry. Companies like Prestige Estates etc. are going to benefit. You can look for undervalued stocks in this sector.
Also Read: What are Real Estate Investment Trusts and how they can benefit you?
Conclusion: Markets have reached new peaks and expected to take some correction before moving ahead. Look for opportunities during these market corrections and start investing. Some of the above are promising sectors and you could benefit more.
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How to get maximum benefit out of Budget of 2014
Note: I am not well. My Son Akhil and Daughter Apoorva helped me by typing this article. Thanks Akhil and Apoorva 🙂
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kindly suggest me to invest Rs 10000 per month in different funds of Rs 1000 or 2000 each for high returns of any duration.
Hi Senthil, You have not indicated your risk appetite. Invest in these funds. If you are low risk appetite investor, remove sector funds and mid-cap/small cap funds. 1) Large cap – HDFC Top-200 / ICICI Pru focussed blue chip fund 2) Mid-cap – HDFC Mid-cap opps fund / Franklin India smaller co’s / SBI Midcap fund 3) Sector – Reliance banking / HDFC Infra / Reliance Pharma funds 4) Balanced – You can check HDFC Prudence / ICICI Balanced fund.
Very informative article. Thanks. As of now, I invested 1 lakh on FD for 5 year lock in period.if i invest 50k more on another FD, shall i availa 1.5 lakhs tax exemption on 80 C. Please advise.
Yes, provided you invest in another tax saving FD scheme
Hi After going through your suggestions on best mutual funds for next 3 years i have made this as my portfolio.
Any suggestions on what to add or remove.
Birla Infrastructure (G)- 20000 lump sum
HDFC Infrastructure (G)- 20000 Lump sum
Birla Sl Pure Value fund (G) 20000 Lumpsum
Birla Sl Top 100 Fund 20000 lumpsum
ICICI Pru balanced Fund 2000 Monthly SIP
ICICI Pru top 100 Fund 2000 Monthly SIP
ICICI Pru Bkg& Ser Fund 2000 Monthly SIP
SBI Pharma (G) 2000 Monthly SIP
SBI dual advantage series 2 fund 30000 lumpsum.
I know you told that we should never invest lumpsum but i think the market will keep growing till year end and sensex should be around 8000 by than hopefully.
Akshay, SBI Dual advantage series, you can stay away from now. Also your portfilio is high risk as it contains infrastructure, banking and pharma sector mostly. Pls review
Any suggestion on what to add to it.Pharma has been growing and infrastructure/banking funds were your suggestion only.
Akshay, My concern was your portolio is high risk as it contains majority of sector funds which includes Pharma, Banking and Infra. I would advice you to keep maximum of 30% to 40% in Sector funds. Hence I asked you to review