Finance minister Nirmala Sitharaman will present the Union Budget 2023 on February 1. This will be the final full Budget before the 2024 general elections. One of the expectations from the Union Budget is that it will empower investors to help them grow in the long run.
We asked four financial advisors what the government should do for small investors and here is what they shared:
Suresh Sadagopan, MD & Principal Officer, Ladder7 Wealth Planners, said, “An increase in Section 80C limit under the Income Tax Act, 1961 is long overdue. If they are doing away with exemptions, the lower tax slabs should be extended to about ₹20 lakh of income.”
Rajani Tandale, Product Head – Mutual Fund, 1finance.co.in, said, “Capital gain tax rationalization is a great idea. We have different timelines for long-term holdings. For equity, it is 12 months, for debt, it is 36 months and for property, it is 24 months. Rationalizing both time period and rates will spur retail investors.”
Aditya Shah, Founder, JST Investments, said, “As a financial advisor, my expectations from the Budget are more relief in Income Tax for the middle class, long-term capital gains rationalisation and increase under the Section 80C exemption limit.”
Dev Ashish, Founder of Stable Investor, said, “The government should rethink the capital gains taxation on equity. Currently, the long-term capital gains (or LTCG on gains above a one-year holding period) are taxed at 10 percent without indexation on gains above ₹1 lakh. It would be best if the government could consider the removal of the LTCG tax on equity investments if investments are held for 24 months (or two years). This will also require redefining holding period-based segregation to 24 months from the current 12 months for deciding whether it’s short-term or long-term. In general, there is an urgent need to rethink capital gains taxation for various assets. There are just too many buckets under the current structure with so many confusing combinations. There is a need to simplify things and reduce the unnecessary compliance burden for everyone.”
There is an ardent need to streamline income classification while streamlining the economy and regulating the capital markets. The threshold restrictions for determining whether an asset is classified as long-term or short-term for tax purposes perplex many investors. This is due to the fact that the holding period required to classify an asset as a long-term investment varies by asset class. Investors hope that the forthcoming Budget will help resolve the same.