By  Shilpa Nayak

It's three weeks after the budget and just a week to go before the financial year ends - put otherwise, the ideal time to think about your investment - and expenditure-strategy for the year that will be. If you're smart, you've probably figured things out already; if you're lazy (and fairly well-off), you may have decided to leave it all to your investment advisor; if you're neither (and most of us fall in this category), read on.

You'll earn more...

But you know that by now. The bulk of the surcharge (minus the 2 per cent imposed after the Gujarat quake) on income tax is gone; and individuals earning less than Rs 1 lakh a year can claim a tax-rebate under Section 88, equivalent to 30 per cent of their investment in specified instruments (against 20 per cent earlier). Ergo, that number on your paycheck will change (for the better).

There is some income-pruning news for individuals with significant interest income: interest on deposits with banks and non-banking finance companies over the magnitude of Rs 2,500 will be subject to TDS (Tax Deduction at Source). Worse, the limit on interest income deductible under Section 80l has been reduced from Rs 15,000 to Rs 9,000. But the reduction in dividend tax could help increase the income of small investors: companies will pay less tax, leading to an increase in the distributable surplus and, in turn, to higher dividends.

The move to tax perquisites (only for individuals earning more than Rs 50,000 a month) on a cost-to-company basis could also pinch, although companies are certain to take this incremental tax burden onto themselves for executives at this level. Net net: you'll have more to spend or invest.

... and saving won't be easy 

Only, it won't be too easy to save. The 1.5 per cent reduction in the interest rates on small savings instruments and provident fund schemes renders these investment options a trifle less attractive than they used to be. The consequent fall in the interest rates on other debt instruments only makes things tougher for investors. In the past, conservative investors could invest in government securities that earned moderate returns. Now, they'll have to be a little more imaginative. Mutual funds could be one avenue you consider. And if market hi-jinks make you dizzy you can always choose a fund focused on debt. Why, even life insurance policies with one of the new insurance companies could prove a smart savings option.

...but borrowing will be

It is a good time, though, to borrow. Banks will now offer educational loans up to Rs 7.5 lakh (for higher studies in India) and Rs 15 lakh (for those without). The deduction in taxable income of the interest paid on housing loans has been upped from Rs 1 lakh to Rs 1.5 lakh. With the interest rates on home loans already low (12.5 per cent in some cases), this could be a great time to take a loan to buy a house. That makes even more sense if you are in the highest tax bracket. Factoring in the savings in tax, the effective rate of borrowing could be as low as 9 per cent. Buy that house now.

P.S.: Don't forget to spend 

Apart from politically incorrect vice-stuff like cigarette and chewing tobacco, everything else costs less post-budget. Homes, as we've already discussed, are cheaper; better still, you do not need to get a clearance from the tax department for property transactions less than Rs 5 lakh in magnitude. The reduction of excise duty on some processed foodstuffs means a follow-up reduction, however insignificant, in their prices. The Rs 200 cut-back in the import duty (on every 10 grams) of gold has already manifested itself in softer bullion prices in the local market. And the contraction in the excise duty on cars and two-wheelers has seen manufacturers announcing price cuts ranging up to Rs 40,000, in the case of the former, and Rs 3,000, in the case of the latter, already. Our recommendation for the year: save, but not too much; borrow sensibly; and spend it all.

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