Budget 2020: How reduction in income tax, removal of LTCG could benefit equity investors

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Updated: January 17, 2020 5:46 PM

Budget 2020-21: The expectations are vivid about lowering of the tax liability for the taxpayers thus leaving more money in the hands of the individuals.

Budget 2020 date, Budget 2020-21, long term capital gain tax on equity, Budget 2020, Budget 2020 income tax, Union Budget 2020, personal income tax, Finance Minister Nirmala Sitharaman, taxpayersUnion Budget India: Removal of LTCG in the upcoming budget is what market veterans are expecting from the FM.

Union Budget 2020: The Budget 2020 presentation of Finance Minister Nirmala Sitharaman is expected to be watched closely, especially by retail investors, on the Budget day February 1, 2020. The expectations are vivid about the lowering of the taxpayers’ tax liability, thus leaving more money in the hands of individuals. It is widely believed that either the personal income tax rate may be lowered or the income slabs may be expanded to provide benefit to the taxpayers. With lower tax outgo and higher investible surplus, individuals get to save for their long term goals by investing in market-linked investments such as equity mutual funds. In order to provide an incentive for individuals to save more, the taxation regime also needs to be in favour of investors. The market also expects the rollback on the long term capital gain tax on equity-oriented products. Sharing her thoughts with FE Online, here is what Mahek Tomer, CEO, Advisorymandi.com, expects from the Budget 2020.

The upcoming Union Budget 2020 of the Modi-led-government is expected to bring in a lot of goodies for various sectors of the country that were failing to attain the balanced regional growth of the country.

Either you SIP, have exposure to Mutual Funds, upgrade your SIP’s yearly to invest directly after scrutinizing the financial statements of the company, the returns are going to be the fruit of the investment done in the era of Modi 2.0 and that too in times when Modi-led-govt. is going to open the brown suitcase with the strategies and tactics to revive the consumption of the country and cushion the falling GDP numbers.

The year 2019 was aimed at employing every quantitative and qualitative weapon by the administration to thrust the GDP numbers and support the sinking consumption of the country. Right from the reduction of 135 basis points in repo rate to settle the corporate taxes to 22%, the administration has respected their statement of ‘Whatever it takes to curb the slowdown’ but failed to curtail any weakness led by global demand concerns.

Watch: What is Union Budget of India?

No one can predict what is in the basket of Prime Minister’s Office to deliver in the Budget 2020 but there are a number of catalysts that could drive the consumption of the country is going to be presented by FM Nirmala Sitharaman. Even though the government has deployed the majority of their tools to counter the slowdown but a handful of options are at their disposal that is expected to keep the consumption story of India rock solid:

Revocation of LTCG

In order to generate decent returns that are able to cover the current purchasing power and plain-vanilla returns from government securities, the retail participants are heading towards equities and equity-linked saving schemes. However, the adaptation of LTCG by the government has been a major hurdle in piling up of investment in those securities that are under the purview of LTCG. So the removal of LTCG in the upcoming budget is what market veterans are expecting for.

Reduction in Income Tax

No one could deny the fact that any reduction in the slabs of personal income is going to leave the retail participants with more disposal income. The reduction in corporate taxes is done with their job as the more leftover is taken for more investment, lower operating costs and an increase in real income. But, a boost in the personal income of the retail participants is still the need of the hour to boost the economy.

Do you know What is Finance Bill, Short Term Capital Gains Tax, Fiscal Policy in India, Section 80C of Income Tax Act 1961, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

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