Navneet Munot, the managing director and CEO of HDFC Asset Management Company (AMC) and a veteran on financial markets, has good reasons to find the just announced Union budget “balanced” in the range of measures undertaken and the promise being held out on what to expect in the days and months ahead.
Among the various announcements made in the budget by finance minister Nirmala Sitharaman, Munot especially welcomes the government’s plan to take up a comprehensive review of the Income Tax Act, 1961.
The finance minister spoke of “a comprehensive review of the Income-tax Act, 1961.” The purpose, according to her, was “to make the Act concise, lucid, easy to read and understand….reduce disputes and litigation, thereby providing tax certainty to the tax payers.” The efforts expected to be completed in six months, are all meant to bring down the demand embroiled in litigation. To her, a “beginning is being made in the Finance Bill by simplifying the tax regime for charities, TDS rate structure, provisions for reassessment and search provisions and capital gains taxation.”
“If we can move towards a more simplified tax structure, one that is more predictable then it will be good for investors,” says Munot while clearly happy at some of the overarching themes like simplification, ease of doing business, greater investor confidence.
On the budget as a whole, he feels, the focus continues on sustainable growth with emphasis on energy transition in general and specifically in agriculture. He also sees merit in dealing with the unemployment challenge by looking at employment creation though public-private partnership. All of it while maintaining fiscal prudence. The last element, he says, is evident from a commitment to work towards fiscal consolidation and move towards lowering the fiscal deficit.
On the market’s immediate negative reaction and from the message on the asset and wealth creation, Munot says, the changes announced on capital gains taxation came as a bit of a surprise with the market in the process of digesting it. But then, he also feels that from here on there is hope that there will be more predictability and stability in the tax structure.
He says, while the market always expects lower taxes, he says, in India, the participation in capital market should be looked at as a means to inclusive development. We do not have well defined social security benefits for retirement. In which case, a large part of the population could tend to create wealth through participation in capital market, looking for inflation-beating returns and create a nest for retirement. However, he feels, the changes announced are not so big as to discourage capital formation.