Budget 2019: Income tax benefits for Bharat 22, CPSE ETF will boost retail investor participation

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Published: July 6, 2019 2:56:53 PM

Budget 2019: After the Union Budget presented by FM Nirmala Sitharaman extended the benefit of Section 80C for investments into Central Public Sector Enterprise (CPSE) exchange traded fund (ETF), experts say that the move will boost retail investor participation.

Budget 2019, FDI in insurance industry, budget 2019 for insurance industry, Reliance Nippon Life, HSBC Oriental Life Insurance, budget newsBudget 2019-20: Presenting the budget, finance minister Nirmala Sitharaman proposed to extend Section 80C benefits to investments into CPSE ETF.

Budget 2019: After the Union Budget presented by FM Nirmala Sitharaman extended the benefit of Section 80C for investments into Central Public Sector Enterprise (CPSE) exchange traded fund (ETF), experts say that the move will boost retail investor participation. FM Nirmala Sitharaman noted that ETFs have proved to be an important investment opportunity for retail investors and has turned out to be a good instrument for Government of India’s divestment programme. “To expand this further, Government will offer an investment option in ETFs on the lines of Equity Linked Savings Scheme (ELSS). This would also encourage long term investment in CPSEs,” she said in her Budget speech.

According to Rahul Jain, Head – Personal Wealth Advisory at Edelweiss, the proposal to extend Equity Linked Savings Scheme or ELSS-like income tax benefits to CPSE and Bharat-22 ETFs, will boost more retail participation in capital markets and increase tax saving options under section 80C. However, investors are advised to make careful choices, he added. Experts say that while CPSE ETF has been successful in garnering income for the government, the disinvestment target is rather ambitious. Notably, FM Sitharaman announced that the government is setting an enhanced target of Rs 1,05,000 crore of disinvestment receipts for the financial year 2019-20. In a bid to achieve this, the Government will undertake strategic stake sale in PSUs. The Government will also continue to do consolidation of PSUs in the non-financial space as well, she said.

Also read: Budget 2019: Higher divestment target could be met, but govt needs to keep this thing in mind

“The government has laid steep revenue target on disinvestment. CPSE ETF have been successful to a large extent and government is looking for a greater participation from general public on this account,” Akhil Mittal, Senior Fund Manager, Tata Mutual Fund said. According to the expert, government’s move to offer an investment option on lines of ELSS (tax breaks) for ETF investing in CPSE’s should encourage long term investments in CPSE’s and also provide an alternate investment option to retail investor which is tax efficient.

Radhika Gupta, CEO, Edelweiss Asset Management said that disinvestment is a stated priority, and extending tax incentives to retail investors in CPSEs oriented ETFs will provide a big push to this category, hopefully both for equity and debt ETFs.  Further, the government also emphasized the need to deepen the corporate bond market, and encourage retail participation in debt, which has been limited so far, she added.

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