Budget 2022 Expectations: Top 10 investors' wishlist from Finance Minister

Finance Minister Nirmala Sitharaman will announce her fourth Budget on February 1, which is widely expected to be a growth-oriented budget.  

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Most experts see Budget 2022 to maintain its thrust on CAPEX-related spending to support growth as we have seen throughout 2021 when the center came out with various production linked incentive (PLI) schemes.

“This Union budget could see FM announcing plans for higher capital expenditure outlay on healthcare schemes and to ignite India’s CAPEX cycle, which is aimed at boosting India’s inclusion in the global supply chain,” Mohit Nigam, Head - PMS, Hem Securities, said.

“The market is looking for support measures for sectors such as housing, autos, and auto ancillaries, PLI-related measures in multiple sectors. Also, some relaxations in taxes and waivers in GST are expected to boost the real estate sectors,” he said.

This will be a growth-centric expansionary budget that will push many right buttons to get the economy out of the Covid shadow.

We have collated a list of investor expectations from the Finance Minister in this Budget 2022:

Expert: Jay Prakash Gupta, Founder, Dhan and Co-Founder, Raise Financial Services.

1.     Incentive for Homebuyers:

The sector supports employment as well as ancillary industries which are mostly SMEs and MSMEs. An increase in Demand for homes would indirectly benefit all associated with the sector. With lower interest rates, and banks willing to lend, this is the best time for individuals looking to buy a home for end-use.

Tax benefit on Housing Loan both for Interest payment and Principal repayment should be increased by Rs 50,000 each from the current limit of Rs 2 lakh and Rs 1.5 lakh, respectively.

2.     Focus on moving domestic savings into Financial Assets:

To boost growth, our economy needs Investments. The investment can either come from FDI or from channelising domestic savings into the mainstream economy. The latter can happen through reducing frictions in Investing in financial assets.

Simpler and centralized KYC to invest across all financial assets, an increase in the limit to invest in tax saving mutual funds from Rs. 1.5 lacs to RS. 2 lacs would be a positive step in this direction.

3.     Focus on Financial Literacy and Personal Finance:

While India is home to around 17% of the world’s population, 65% of which is below 35 years of age, the financial literacy rate is merely 24%.

Personal Finance should be a subject in school that can create a base for citizens who can channelise savings into investments, creating wealth for themselves and for the economy. Policy guidelines in that direction in the upcoming budget would be a welcome step.

4.     Incentives for FinTechs working for the Unbanked population:

FinTechs which are in microcredit and lending, who spend on technology and various tools to reach out to unbanked or underbanked category of the population not catered by mainstream NBFCs and Banks, are working towards the objective of financial inclusion.

A framework to provide tax incentives, easy accessibility of funds would again be a welcome step.

5.     Reduce lock-in period for Sovereign Gold Bonds (SGBs):

SGB was launched with an objective to bring down demand for physical gold purchases and shift domestic savings into financial savings.

Reduction in lock-in from 5 years to 3 years and avail LTCG benefit upon exiting after 3 years, will bring back money in the hands of households and individuals.

This will help in increasing the circulation of money in the economy leading to more consumption and investments.

Expert: Prem Prakash, Co-founder & CEO of CapitalVia Global Research Limited.

6. Increase in 80C Limit:

For salaried class government might consider increasing the PPF limit increase under 80C from 1.5 lacs as it was untouched in the last budget.

7. Tax Benefit on Housing Loans:

Higher capital expenditure is expected in this budget in my opinion and will be more focused on infrastructure and the real estate sector.

Tax benefits on housing loans both for interest payment and principal repayment could be increased by Rs 50,000 each from the current limit of Rs 2 lakh and Rs 1.5 lakh, respectively.

8. Eye on Divestment Target:

The street would focus on government’s disinvestment targets as government failed to meet its 1.75 lac crore target and in this year this target might be revised.

Expert: Parth Nyati, Founder, Tradingo

9. Reduction in STT:

I believe securities transaction tax (STT) should be removed or at least reduced because initially it was introduced in the place of long-term capital gain tax but now, we have both LTCG and STT that is not fair for the Indian investors.

The transaction cost in India is too high and LTCG and STT are seen as a sentiment dampener for the market, resulting in very few traders turning a profit.

Stock market penetration is increasing in India, and it is anticipated that the government will take policy measures to ensure that the Indian market becomes more investment-friendly in comparison to other emerging markets and reducing LTCG and STT could be a good step in that direction. It can enhance trading volumes immensely, resulting in a higher tax collection.

10. Rationalize the LTCG and STCG

SEBI is prohibiting brokers from providing intraday leverage to traders, higher impact costs have been incurred, and a reduction in STT can boost volume, thereby reducing the impact costs.

When the cost of transacting in India decreases more, it will only encourage more foreign participants to invest in our economy and trade on our exchanges.

Government should also rationalize the LTCG and STCG because a reasonable rate of income tax will encourage people to pay tax and do things in the right way.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)