Proposals to curb the parallel economy, nips and tucks in i-t exemption limits, steps towards unlocking stalled money — the govt seems determined to revive the investment cycle
The Budget is high on intent and high on action as the government has taken decisive steps on many fronts. The proposals appear to be in the right direction as they look to kickstart the investment cycle by focusing on the triad of roads, ports and power, accompanied by financial market reforms.
Steps to monetise gold and the issue of gold bonds will go a long way in boosting households’ financial savings whereas gold coins should help reduce imports. The budget floats many proposals to curb the parallel economy. One of them is to prohibit acceptance or payment of any amount of R20,000 or more for transactions in immovable property. Further, quoting PAN will be mandatory for any transaction exceeding R1 lakh.
The widely anticipated hike in the section 80C limit did not happen and Section 80CCD saw an additional deduction of R50,000 on investments in NPS. Pension, however, should have been given the EEE status. The hike in deduction for health cover premium was long overdue.
The rationalisation of the capital gains regime for REITs and Infrastructure Investment Trusts and a pass-through facility for REITs’rental income will help release the funds locked up in various completed projects. Tax-free infra bonds will aid long-term financing of projects. These bonds should be made available for retail investors as well. The merger of mutual fund (MF) schemes will no longer attract capital gains tax, which should encourage consolidation in the MF industry.
The budget has several proposals for those at the bottom of the pyramid. Pradhan Mantri Suraksha Bima Yojana, an accident cover with R2 lakh sum assured for merely R12 per year, has been proposed. Along with Pradhan Mantri Jeevan Jyoti Bima Yojana and Atal Pension Yojana, it has been clubbed under ‘Universal Social Security System’. For the middle class, the budget does not have much in terms of increasing the disposable income. For the top of the pyramid, the replacement of wealth tax with a surcharge is a step in the right direction.
The Budget is a statement of account for the government. Considering its limitations, the government has done a great job. There is a visible effort to unlock the money held up in non-productive assets.
By Rajiv Bajaj, VC & MD, Bajaj Capital