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Budget 2020: Broking industry wants FM to put investment, broking community on strong footing

Budget 2020-21: As usual, this time too, budget expectations are running high. With economy in a slow mode, household savings and investments in a sour zone, everyone is expecting the finance minister to provide a ‘growth surcharge’ for retail investors and the broking community at large.

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Union Budget 2020 India: To realize the goal of $5 trillion by 2025, the government has been, and continually is, announcing measures to boost private investment.

By Tejas Khoday

Budget 2020 Expectations for Broking Industry: It is Budget time again. In less than 8 months, Finance Minister Nirmala Sitharaman will be presenting the full budget, this time for the financial year 2020-21. Post an emphatic victory for the incumbent government, budget expectations from individuals and corporate were running high. But, with a new surcharge for the super rich, 20% additional tax on buyback of shares, proposal for raising the minimum public holding threshold from 25% to 35%, the Budget of Jul 2019 created ripples across the stock market participants, corporate and common citizens. Since then, many of the announced proposals have been reversed or toned down, owing to backlash from various quarters.

As usual, this time too, budget expectations are running high. With economy in a slow mode, household savings and investments in a sour zone, everyone is expecting the finance minister to provide a ‘growth surcharge’ for retail investors and the broking community at large. Similar to the rejoicing witnessed post cut in corporate tax, taxpayers are awaiting an upgrade in personal tax slabs. Though one cannot be sure if such a relief is possible considering the fiscal deficit & state of tax revenues, rumours are rife, of a choice between a personal tax change or a direct increase in rural spending.

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When it comes to the stock market, barring a handful of stocks, FY19 mostly was a lacklustre year, similar to the year before. Many regulatory changes brought in during the last 2 years — starting with the imposition of LTCG in Budget 2018, recategorization of mutual fund schemes, abrupt changesfrom providing Intraday leverageby the stock brokers & later providing relief, etc – have caused confusion among brokerages, fund managers, investors and traders alike.

The FM needs to use this budget to place the investment and broking community on a strong footing. A change in personal tax would surely boost savings and provide the right impetus to investments. But for a maximum impact on sentiment, abolition of the much-criticized Long-Term Capital Gains (LTCG) tax would be an excellent move. It is imperative that the equity taxation regime in India be at par with international standards. A widely discussed point of note is redefining the concept of Long Term to 2 years and the change of taxation to Zero. This would also be a welcome move, as it can bring stability to the duration of investments across financial assets.

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A few proposals which are in the wish list of the broking community relate to:

1. reduction in the quantum of Securities Transaction Tax (STT) /Commodity Transaction Tax (CTT) which has a been a long pending wish from one and all,

2. enforcement of uniform stamp duty across all states, including slashing the duty by 50% and finally,

3. exempting dividends from taxation up to a limit as deemed suitable by the finance ministry.

These are critical points of note and any relief in one or more of these proposals would go a long way in boosting the investment spirit of all investors – retail, institutional, Indian as well as global.

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To realize the goal of $5 trillion by 2025, the government has been, and continually is, announcing measures to boost private investment. This goal cannot be achieved by the government alone and needs to work in unison with investors at large. The Union Budget 2020 is an apt mechanism, offering the most credible & appropriate platform, to announce to Indian and global investors, that it is the time to invest in India and the government is willing to commit to ease of investments for a long time to come.

These proposals, if implemented, would start off the new financial year on the right track, chugging along, delivering the much needed ‘growth surcharge’ across sectors.

(By Tejas Khoday, CEO and Co-Founder, FYERS)

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