Decoding Budget 2019: The Hidden Opportunity for Smart Investors to Create Tremendous Wealth

The interim budget 2019 included few indicators properly placed in the budget speech, if identified and analyzed properly, could become a great opportunity for smart investors to create tremendous wealth in long term. This blog tries to explain and analyze the same.

1.Vision 2030 and Economic Growth

For the long term investors in India, it was an EXCEPTIONAL budget as for the first time ever, it has done something unusual. Generally, budget includes plan only for next 1 year and this, being an interim budget, its utility is even shorter – just 2 months. However, this budget is so courageous that it charts out an 11-year plan with Vision 2030.

In addition to a 10 point 2030 vision, India aspires to be a 10 trillion dollar economy in just 13 years. The Indian economy is about $2.8 trillion and growing to $10 trillion in 13 years translate into growing 3.5 times in 13 years, i.e. growing more than 10% p.a. for 13 years.

2.Trusting of Citizens

The government appears to trust its own citizens and it can be seen as 99.54% income tax returns were accepted as filed (no addition of income or asking of information). Only 0.46% returns were processed with department interaction. Also, the government has taken steps to reduce the processing of return from 6-8 weeks to just 1-2 days in 18 months and within 2 years, 100% of tax returns will be processed remotely without any physical interaction.

3. Rewarding Honesty

For the first time, honest tax payers like us have heard “Thank You” from the finance minister. Rewarding honest citizens is clearly evident in Demonetization, Jan dhan, Aadhaar linking, Direct benefit transfer, GST, and now with the changes proposed in the budget. For instance, the budget proposes additional 3% interest subsidy to honest farmers for timely repayment of loan instead of waiting for election year for loan waiver.

4. Addressing Fears

The Government has worked hard to address the fears of common persons with schemes like Jan Dhan, Awas Yojana, Suraksha Bima Yojana, Jeevan Jyoti Boma Yojana, Atal Pension Yojna, Vay Vandana Yojana. The budget also increases limit for gratuity, ESI, EPF as well as introduces bonus and pension for low income citizens with Shram Yogi Maandhan Yojana.  All these would provide mental security to citizens for emergencies like life, medical and retirement expenses.

5. Savings and Prosperity

The game changer proposal is no tax for persons having taxable income of less than 5 lakhs. There are more than 3 crore tax payers whose taxable income is less than 5 lakhs. If planned perfectly taking benefits of deductions, exemptions and credits, a family of 4 can easily have income of 30-40 lakhs per year EVERY year and pay 0 tax. LEGALLY. This is a masterstroke that would increase the official savings of Indians and will ultimately lead to prosperity.

Overall effect:
All the above 5 factors could result in the increase of number of individual tax return filers and/or reporting of higher income as it would not result in additional tax. Assuming 3 crore tax payers increase reporting of 2 lakhs income per year, it would mean 6 lakh crores of official income / money in bank EVERY YEAR.

All these official income would EITHER increase official spending – driving consumption OR increase investments in financial assets rather than real estate and gold. And ultimately, with the multiplier effect of official money, it would drive economy and create an amazing experience for long term investors.

In short, Future is very exciting for smart investors who spot and utilize this opportunity to create wealth. While there would be bumps along the way, tax planning as well as planning for investments with an eye for identifying and analyzing opportunity holds the key for tremendous wealth creation.

Please share your comments below. Thank you.

About Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)

Mr. Jigar specializes on NRI Investments and Taxation. He is proud to be one of only 21 CFA Charterholders in India working as consultants. (In 2011, when he became CFA Charterholder, out of 97,173 CFA Charterholders in the World, only 697 Charterholders were in India and only 3% work as consultant; Source: www.newcfa.org). He received his MBA (Finance) from University of Illinois, Chicago, USA, CPA from USA and a Chartered Accountant from India. Jigar has over 15 years of professional experience including more than 4 years with KPMG USA’s Risk Advisory Services. Currently, he provides Wealth Management and taxation consulting serving clients from USA, UK, Americas, Europe, Middle East, Asia, Africa, Australia and India.
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4 Responses to Decoding Budget 2019: The Hidden Opportunity for Smart Investors to Create Tremendous Wealth

  1. Pandri says:

    Your artcicle summarizes known aspects of the budget-2019. Where are the HIDDEN Opportunities that your title proclaims? I was hoping you would un-hide them for the benefit of small timers like me…

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Most important part of an opportunity is to identify the same. Just listening or reading the budget, it is possible to take the budget for respective proposal and miss the overall impact i.e. opportunity, which may stay hidden. Realizing hidden opportunity depend on how you identify, co-relate and analyze the known aspects in the budget and use it for your advantage, which this article addresses. Also, if you know everything but do not act, you may not realize the potential. Thanks.

  2. Shirish says:

    Regarding your statement
    “If planned perfectly taking benefits of deductions, exemptions and credits, a family of 4 can easily have income of 30-40 lakhs per year EVERY year and pay 0 tax. LEGALLY.”
    I feel that it is not so easy. It may require years of planning to do so due to clubbing provisions. Also, the source of income can be always questioned if you simply create more tax heads in the family. Other factor to consider is if you transfer or create assets in the name of children (major or minor), then there would be complications when the children grow older and have their own incomes.
    Would you please elaborate on this?
    Regards,

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      1. 4 person family means 4 persons filing returns i.e. major children.
      2. As this is for next year FY 19-20, it can be planned.
      3. Gift to spouse or minor children are not recommended due to clubbing provision. But income for spouse can be planned so clubbing provisions do not apply.
      4. If you have minor children, you could have income of 15-20L and pay 0 tax. Thanks.

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