As we draw closer to the budget for a financial year, people start to make random predictions about what might come from it. And then there are others who have expectations (wants) from the budget. This is a standard routine every year. It is such an useless exercise, but people and news media always like to do it every year without fail. During such times, I dread to open my news app because there is nothing much other than predictions and wants. No actual news. I wouldn’t do justice if I too did not join the bandwagon and produce crap news. So here is one of them.
Retail investor expectations
Lets get started with what the retail investors want from the budget. They want the limit on exemption for tax on capital gains on equities to be raised from Rs 1 lakh. For those who don’t know, there was no tax on long term capital gains on equities for a long time. Then it was changed in one of the union budgets. A tax of 10% is applicable on capital gains over Rs. 1 lakhs. Now the retail investors are hoping the limit to be raised.
Currently, there is a disparity between how capital gains and tax are calculated between debt mutual funds and direct investments into bonds. Basically, direct investments in bonds, debentures, government securities etc are considered as long-term if you hold them for more than 1 year and they are taxed at 10%. However, if you invest in the same securities (bonds, debentures etc) via debt mutual funds, they are considered long-term only if you hold them for more than 3 years and the tax is 20% after indexation. Investors want this disparity to be removed.
Moreover, they feel the threshold limit of Rs 5,000 for TDS on dividend distribution on mutual fund units is too low. They hope that it will be increased to at least Rs. 10,000. Finally some hope for securities transaction tax (STT) to be abolished.
Source: Economic Times
Salaried employees expectations
Not to be left out, the salaried employees have their own expectations. Already the government allows a standard deduction of Rs. 50,000 under section 16 of the income tax act for salaried employees. They are hoping that this limit will be increased to Rs. 1 lakh. The reason is that the cost of living expenses have increased due to COVID lockdowns. Apparently they are spending more on telephone, internet, electricity and furniture as they are forced to work from home.
Source: Financial Express
Well if retail investors and salaried employees want something, why should NRIs be left out? NRIs are supposed to pay higher taxes when it comes to selling property or mutual funds or even stocks. I really doubt any of them are actually paying taxes when they sell property because real estate is such a grey area in India. If Indians are not paying taxes, I have very little belief that NRIs will be paying taxes at a higher rate. At least TDS on mutual funds is more transparent. Anyway, they want the budget to reduce taxes for NRIs holding properties and mutual funds.
Another thing NRIs want fixed is to have a basic exemption limit. Currently residents have a basic exemption limit of Rs. 2.5 lakhs. So if you don’t have any income and sell some mutual funds, you don’t have to pay any tax until the exemption limit. However, this does not apply to NRIs and they have to pay tax on the capital gains even if they don’t have any other income.
NRIs are already eligible to take the Section 80C deductions (Rs. 1.5 lakhs) and Section 80CCD(1b) (Rs. 50,000). However, there are some restrictions on where they can invest. Specifically they are not allowed to invest in senior citizen savings scheme (SCSS). They want these restrictions to be removed.
They also want other tax deductions like medical treatment of disabled dependents (Section 80DD) etc. Their explanation is that while they are living abroad, they are taking care of medical needs of some relative living in India.
Source: Economic Times
Investment institutions expectations
Is there a rule that only individuals can dream of a favorable budget? Why can’t investment institutions have expectations? So money managers don’t want the government to fiddle with anything related to capital markets. They want government to continue spending to help economy grow, but at the same time don’t want it to increase taxes on capital markets.
They also want government to maintain fiscal prudence. The suggestion is to increase non-tax revenue by meeting the divestment targets. If that did not make any sense to you, don’t worry. It is not really that important to understand.
Currently tax free bank FDs have a tenure of 5 years. But other tax saving instruments like ELSS require you to be invested for only three years. So banks want even tax saving FDs tenure to be limited to 3 years. There are a few more things the banks want which you can read from the source link below.
Not to be outdone by banks, fintech companies have their own set of expectations. Again, I won’t go into any of the details because now we are entering into the realm of great unknowns as far as my knowledge is concerned. You can read more in the source link.
Source: Zee news
Life insurers expectations
Well, if bank and fintechs can have expectations, then why not life insurers. Currently Section 80(c) has a bunch of investments that all fall under the Rs. 1.5 lakhs exemption. There is ELSS, school fees, insurance premium payments, SCSS investments, EPF, home loan, and more, all of which fall under Section 80(c) exemptions. Now, life insurers want a separate exemption bucket just for life insurance premium payments.
Moreover, they want annuity to come under tax rebates. Currently annuity is taxable in the hands of the receiver as it is considered as a salary. They want this changed.
Source: Business Standard
Now that we have covered investors and institutions, we now come to specific individuals. So here we have Nithin Kamath, CEO of Zerodha who is hoping that the budget will reduce STT, the tax that retail investors pay when trading.
Source: Economic Times
Then there is Srivatsan of Nangia Andersen LLP expecting government will levy TDS on sale and purchase of cryptocurrencies. He wants a tax rate of 30% on them.
Source: Free Press Journal
Women entrepreneur’s expectations
Finally we have women entrepreneurs who also want something from the budget. I won’t go into the details but feel free to thumb through the source.
Source: Economic Times
The funny thing is that except for one news article, all the other ones arrived in my news feed on one single day. Much ado about nothing! Usually people expect a lot of things from budget but generally there isn’t a lot in it. However, that does not stop one from dreaming.