Another year and another national budget session has concluded. Again, there isn’t much in the budget that affects me either in terms of investments or expenses. There is some good news for salaried folks and people with income or senior citizens. But for an early retiree with no other income other than my investments, there isn’t much. There is a slight good news and a slight bad news which I will get to in a minute. The budget is making the new tax regime more appealing and trying to move as many tax payers into the new tax regime. However, for me, the old tax regime is still the best option.


Since 2020, I have been writing about how the budget affects me. You can read the past reports below:


As usual, I will not be going over all the details of budget announcements. I will only be writing about those highlights which affects my investments, redemptions, expenses or capital gain harvesting.


The good news is that the “no tax slab” in the new tax regime has changed from Rs. 3 lakhs to Rs. 4 lakhs. That is great. But the better news is that income up to Rs. 12 lakhs will be tax free because of tax rebates. The limit was Rs. 7 lakhs earlier. This would be great news for any one with regular income like salary, pension, rent, fixed deposits income etc. Unfortunately for me since I don’t have any such income, it does not matter to me.


The bad news for me is that any income with special tax do not get the benefit of tax rebate. All the capital gains from debt mutual funds (long term) and equity mutual funds fall in this category. Since that is my only source of income, I cannot take advantage of the whole Rs. 12 lakhs worth of tax free income. For me, the limit is Rs. 4 lakhs of tax free income. Which is fine anyway because my capital gains are usually below that.


For me, the old tax regime still makes sense because I can take Rs. 2.5 lakhs of tax free income plus another Rs. 1.5 lakhs worth of sec 80(c) deductions bringing the total to Rs. 4 lakhs of tax free income like with the new tax regime. But in addition to that, in the old tax regime, I can take the rebate of Rs. 12,500 on any kind of income including capital gains with special tax. So I can have an additional Rs. 1,00,000 long term capital gain income at 12.5% tax, which cancels out the Rs. 12,500 tax rebate.


In addition, like before, I can do the long term equity capital gains harvesting for an additional Rs. 1.25 lakhs without incurring any tax. So my total capital gains for the year can be Rs. 6.25 lakhs. More than enough to support my expenses. In the new tax regime, that limit would be Rs. 5.25 lakhs. As a result, I will continue to stick with the old tax regime even for the next financial year :). They did not sweeten the deal enough for me to switch over to the new one.


Of course I could take another Rs. 50,000 benefit under Section 80CCD in either tax regimes, but I don’t much care about NPS. If you don’t know, read about my stance on NPS in an earlier post.


One good news, which initially looks like a bad news, is that all capital gains from investments in debt mutual funds starting from April 1, 2023 will be considered as taxable at applicable rate whether it is long term or short term capital gains. Which means, those capital gains don’t fall under the special tax. So I can take the tax rebate in the new tax regime. As a result, I am planning to switch to new tax regime every once in a while to harvest all such capital gains up to Rs. 12 lakhs!


Finally, it seems like Sovereign Gold Bonds (SGBs) are being discontinued. Not that I care about SGBs anyway. Again, if you don’t know, read about my stance on SGB in an earlier post.


Other than those mentioned above, none of the other announcements made during the budget speech affect me directly. The new tax regime will be more attractive to senior citizens with a lot of income. For my parents who have income only from SCSS (senior citizen saving scheme) and a few FDs it does not matter. Their income was never even close to the previous limit anyway. So, increasing the limits does not make a difference to them. They don’t have any pension or rental income or anything else. My wife has some rental income which again has always been lower than the previous limit, so it does not matter that the limit was raised to Rs. 4 lakhs to her either.


There you have it. All the changes from budget that affect me.