Budget 2022: Wish list of a common man

By Anupama Bhargava,  CFP

With yet another Pandemic and upcoming assembly elections, the budget 2022 comes at a crucial time with a number of expectations and wish lists of the common man.  Now will Budget 2022 be a fair budget or more focused on populist measures to please the electorate? Would the common man’s aspiration be sacrificed on the altar of much needed growth numbers or it would be a goodie bag focused on tax breaks and exemptions?  In a backdrop of internal concerns like the Omicron and rising inflation and external factors like the crude prices and Fed rate hikes, there is a requirement of continued and exigent steps by the Government to support the economy. It is certainly an uphill task for madam Finance minister to work out a budget that is balanced in the true sense.

Before we delve into the wish list of the common man, we certainly should have a quick recap of the last year.  Post Covid 19, there were sops doled out through liquidity infusion to the tune of 17.22 lakh crore, almost 8.7% of the GDP from Feb 20 to Sep 21 (as per the Monetary policy report published in October 21).  FY 21-22 was a good one from the point of tax collections, both in the form of direct taxes and GST (10.80 lakh crore and 10.7 lakh crore collected till Dec 21 respectively). The Government’s target of keeping the fiscal deficit at 6.6% of the GDP may just be a step away.

In the present times, one way for this to happen could be through sharp cuts in expenditure but this could hurt the economy; a double-sided sword indeed! Post Omicron, as the country goes in and out of lockdowns, a hit on the consumer and business spending looms large.  There is a requirement to provide the much-needed support in terms of assurance through CAPEX related spending in manufacturing and infrastructure. Other sectors like housing and healthcare are some of the sectors that are looking for a booster dose through Govt expenditure.

While these are issues that are of concern to the economists, the common man is more worried about mundane things like lower taxes and more money in his pockets and in an election year, the common man cannot be taken lightly. Lets’ have a quick peek into the mind of a common man and see what he expects from Budget 2022.

An Increase in the Basic Exemption Limit:  This is something that is on the wish list of most taxpayers. An increase in the basic exemption limit from current Rs 2.5 lakhs to 3 lakhs would be desirable. This would put more money in the pockets of the people affected post corona by lower incomes and job losses.

Incentive for Homebuyers:  After a long hibernation, the real estate market is finally showing green shoots.  Thanks to the stable monetary policy of the RBI, the lending rates are low and conducive for homebuyers to buy their homes. The real estate market has been deflated for a long time now and any boost to this sector would benefit many other ancillary industries and create employment and growth for MSME’s and SME’s.  An increase in the home loan benefit that can be availed as tax savings while keeping the borrowing rates low is what home buyers and most realtors wish for.

Lower Capital Gains Tax on Equity Transactions:  As most Indian investors still favor the traditional investments like bank FD, gold and real estate, only a fraction of domestic savings gets channeled into the financial markets.  Though many investors, majorly the millennials, in the last few years have taken to the stock markets, the financial markets still continue to get a lower share. On the back of higher incomes, Indian domestic savings are set to be over 3 trillion in the coming decade. Incentives in the form of tax breaks and lower capital gain taxes would act like a conduit for these inflows to flow into the economy. Currently, a 10% LTCG tax is levied on sale of equity investments that have been held for a period longer than 1 year. Removing this capital gains tax or at least increasing the current exemption limit of Rs. 1 lakh in a year would attract more funds into the financial markets and in turn would bring more money in circulation.

Remove STT on Equity Investments: Introduced in 2004, STT (Securities Transaction Tax) sticks out like a sore thumb for equity market traders. A tax rate between 0.001%-0.2% is levied on equity trading reducing the gains made by an investor on equity.  It makes no sense to have LTCG, STT and also GST levied on every transaction that an investor makes.  These need to get moderated if we want more inflows into the financial markets.

Crypto Clarity:    This is a much awaited decision that needs redressal in this budget.  The crypto currency bill is long overdue as the whole crypto currency industry waits with bated breaths. There are more than 20 million crypto investors and substantial investment amounts in the asset in the country and with many investors, especially millennials getting attracted towards this new form of investment, it is important to either regularize it or altogether ban it. Treading the middle path will only lead to confusion and losses for the retail investor. Then there is also the issue of taxation of gains from crypto which needs clarity.

Boost to Startups:  Indian startups raised over $42 billion in the year 2021 which resulted in more than 45 Unicorn companies (companies with $1 billion valuations).  The Government has announced that Department for Promotion of Industry and Internal Trade (DPIIT) is focused on creating 2 million new jobs in start-ups by officially registering 50,000 new start-ups, over the next four years.  What is now needed is  start up friendly policies and tax relaxations which would in turn promote spending in research and innovation and reduce costs in terms of taxes.

It is well appreciated that this budget has a lot riding on it. The challenges of bringing out a budget that is acceptable and popular amongst all are indeed tough especially given the present situation where many individual taxpayers face loss of income and many small businesses struggle with lower margins and high operating costs; post covid. The rising inflation and the pressure to keep the growth numbers favourable certainly do not make the job any easier. Yet the hope for better times remains strong as we look forward to the budget 2022… till then we wait and watch with our fingers crossed!

(The author is a Financial Strategist and Money coach. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).