Budget 2021 Expectations – Capital Gains tax rationalisation to boost investor sentiment, this expert says

Budget 2021 Expectations – What is it that market wants from the Narendra Modi Government in this Budget 2021 announcements? What can lift the mood of the investors? Market Expert Jashan Arora, who is the Director of Master Trust – a broking and financial services company said that he expected rationalisation of capital gains taxes or STT (Securities Transaction Tax) with regards to investments.

This will also boost sentiments he added.

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"The government is expected to take some crucial steps to kick start the economy, after the dip in the growth rate of the economy in 2020,” Arora said.

“The FM has described the upcoming FY22 budget as a ‘never before’ event given that it will be presented in the backdrop of the pandemic. The Budget may focus on government spending to aid economic recovery,” the Director further said.

However, he was of the view that before expecting any tax relief the current economic situation should be considered as the government’s finances are extremely stretched.

GDP is expected to contract by around 8-10 percent and fiscal deficit is at record highs, he reasoned adding that there is also a “large scale expenditure planned on Covid-19 vaccination”.

Arora said that one should not expect any major rationalisation in the income tax slabs or rates as there was a need to increase government spending especially capital expenditure.

As the government finances are currently stretched, the Finance Minister could announce certain savings schemes or bond issuance like tax-free bonds to raise resources to fund such government expenditure, he opined. Investment-based relief and flexibility in terms of setting off loss can be expected, he further said.

Investments from retail investors into such schemes or bond issuance will also be encouraged through such measures, he said commenting on his expectations from the Union Budget 2021.

Meanwhile, industry body Federation of Indian Chambers of Commerce and Industry (FICCI) in its pre-budget recommendations has suggested the government to double the overall deduction limit under section 80C to Rs 3 lakh from the current Rs 1.5 lakh.

To incentivise health insurance for individuals and encourage voluntary purchase, the amount of deduction towards payment of medical insurance premium could be enhanced to Rs 50,000 from current Rs 25,000, it had said.

Master Trust claims to be a one-point shop targeting its services towards the retail customers. The broker offers instant trading and Demat account facility.