Like last year, here is a quick overview of how the 2022 budget affects me. This is not an analysis or highlights of the budget. I am sure you can find many articles on those topics. This post is more specifically on how the budget affects my financial planning. This year’s budget has absolutely no affect on my financial planning. It is one of the shorter budget speeches. There were a lot of expectations from everyone and I wrote a post on that. Just as predicted, nothing happened. Every year, right before budget there is a lot of noise and anticipation. Budget day comes and goes and everyone is back to their routine :).


The only noteworthy point was the tax on cryptocurrencies. We already expected that to happen anyway. So now there is a 30% tax on capital gains when you sell cryptocurrency. You can offset losses against gains from other cryptocurrencies, but not against any other heads. Which basically means that if you have capital gains elsewhere, you cannot offset losses from cryptocurrencies. You cannot even carry forward your losses.


There were no changes to tax slabs or more deductions for salaried employees. Lots of people were hoping that there will be some tax breaks given the COVID and work from home situation. But the government does not have so much money to give tax breaks. It is already borrowing quite a bit to fund the liquidity in the system and supporting various schemes. It cannot take anymore hit to the revenues even as the expenditures are going up.


In fact when the finance minister announced higher than anticipated borrowings for the next fiscal year, the bond yields shot up. When yields goes up, obviously the prices of bonds fall. If you don’t understand why, don’t worry. It is not really important, but just know that most of the duration debt mutual funds lost a lot of value after the budget day. It is funny that nothing happened to stock market, but the debt market had some pains.


Thanks to the yields going up, my portfolio lost some value the next day. Remember that I am very debt heavy in my asset allocation. So a small loss in the price of debt mutual funds has a big impact. Thankfully I have most investments in ultra short term funds which did not fall a lot in NAV. But the longer duration funds like short term and gilt funds lost some value. This is one of those rare times when debt mutual funds lose value :).


Sudden drop in NAV of a short term debt fund after budget 2022

That is all there is to talk about budget 2022. Since I don't have any investments in cryptocurrencies, nothing has really changed in terms of my financial planning. My portfolio took a small hit in value thanks to higher borrowing by the government. Otherwise, there is nothing much to write.