Consider these 9 things before investing in mutual funds!
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The Budget this year comes in the backdrop of hope with the commencement of vaccination drive, recovery of the economy from the pandemic led crisis, volatility in the stock markets, etc.
On the personal tax front, the government would look to boost the consumption by increasing the purchasing power and may consider increasing the limits for deduction u/s 80C, enhanced deduction u/s 80D to include preventive healthcare may etc. One could also expect a relaxation on the residency rules to address Covid situation.
On the corporate front, focus shall be on promoting the existing initiative of Aatmanirbar Bharat, export incentives and PLI scheme. With a view to facilitate ease of doing business, the budget could also see some reforms on fund raising, law on overseas listing of domestic companies, tax exemption for outbound mergers, etc. Corporate tax rates, which are already at moderate level may continue to remain unchanged and one could anticipate introduction of Covid cess. On the same lines, one can also expect some tax concessions related to research and development and vaccine distribution.
The government may also consider extending the angel tax exemptions to Category-II investors, including Private Equities and other type of investors to encourage startups.
Considering that the pandemic could result in heightened activity relating to restructuring. One can anticipate an ease of norms for business restructuring. Measures such as extension of carry forward losses to service undertakings (currently only allowed to industrial undertaking), providing tax neutrality of amalgamation / demerger of LLPs, clarifications on carry forward of losses in case of change in shareholding pattern, rationalizing the valuation rules for section 56(2)(viib) and section 56(2)(x) may be considered.
On the capital markets front, the government may consider streamlining the capital gains tax and period of holding among different securities. It would be interesting to see if the government revisits its position on matters such as applicability of TCS on sale of unlisted equity shares. Securities Transaction Tax and Buyback Tax.
On revenue mobilisation, one could expect the government to announce disinvestment roadmap and with a view to reduce litigation, the government may consider options such as mediation or a permanent dispute resolution system with pre-specified benchmarks on the lines of the ‘Vivad Se Vishwas’ scheme.
To summarise, the expectation from Finance Minister Nirmala Sitharaman is of a roadmap that propels economic recovery and puts India on a path of sustainable growth.
(The writer is founder, Transaction Square. Views expressed are personal)