Tag: Budget Hotline

Budget 2020: Here’s what the mutual fund industry hopes for

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Association of Mutual Funds in India (AMFI) has sent a long budget wishlist to the finance ministry that includes many demands that were not addressed in the past.

For the debt schemes, AMFI has again proposed for the Debt Linked Savings Scheme (DLSS), much like the Equity Linked Savings Schemes (ELSS) to come into play and that investments up to Rs 1.5 lakh should be eligible for tax benefit with a 5-year lock-in.

AMFI has also requested clarity regarding the side-pocketing rule saying the move is undertaken to protect investor interest in the case of a credit event. As of now, if a security or a paper moves into the side-pocket or the segregated portfolio, when there is a recovery, it is subject to short term capital gains tax.

They have also proposed to do away with the long term capital gains (LTCG) and have suggested to recognize equity mutual funds as ‘specified long term asset, which does not attract LTCG and channelise at least some of the gains from the sale of immovable property into the capital markets. On gold and commodity exchange-traded fund (ETFs), the ask is to lower the holding period to 1 year from 3 years, similar to listed debt securities.

Dividend distribution tax is another big ask. For equity mutual funds, they have asked that the category be brought at par with Unit Linked Insurance Plan (ULIP), as ULIPs do not pay tax on the bonus declared, which is similar to dividends in a mutual fund.

Likewise, ‘EEE’ or ‘exempt exempt exempt’ status of debt schemes under Section 80CCD with an overall ceiling of Rs 1.5 lakh. They have also asked for an exemption for Employees’ Provident Fund Organisation (EPFO), National Pension Scheme (NPS), insurance companies and so on who invest in equity mutual funds. Again, on the securities transaction tax (STT), ‘EEE’ status is sought for equity mutual funds.

Finally, they have also asked that intra-scheme switches within a fund house should be exempt from payment of capital gains tax.

Discussing the likelihood of the above wishes coming through in the budget, Alok Agarwal of Deloitte India said, from an individual perspective one of the key expectations would be that the Rs 1 lakh limit, over which you have to pay the 10 percent LTCG tax is on the lower side and that could be reconsidered because for individuals who are invested in the equity instruments, one year may be short relatively. However, if they are holding these investments for longer than that, then they should be eligible for a better tax treatment. So perhaps there could be an increase in that Rs 1 lakh threshold so that they do not get slapped with a 10 percent tax as soon as they have gains exceeding Rs 1 lakh.”

Agarwal further added that there is limited scope to cut taxes directly.  “However, there is hope for some rationalization on the tax slabs again in-line with some of the recommendations made by several tax committees. There may be some relaxation at the 20 percent slab which kicks in from the Rs 5 lakh to the Rs 10 lakh slab and there is always scope for the 30 percent slab rate as well exceeding Rs 10 lakh and that Rs 10 lakh may be increased to maybe Rs 20 lakh.”

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Budget 2020: Govt can look at rationalising tax structure, tax slabs, says EY India

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Ahead of Budget 2020, CNBC-TV18’s special show ‘Budget Hotline’ gives its viewers an opportunity to put forth all their tax queries as well as share their expectations from the budget. Sonu Iyer of EY India answers all tax related queries.

Talking about her expectations from budget Iyer said, “With regards to the rationalisation of long term capital gains tax on equity transactions, there could be two things – one, they could increase the holding period from 12 months to 24 months and do away with the tax totally or restricting it to the continued 10 percent tax on long term capital gains but increasing the holding period to two years wouldn’t really have much of an impact. If they want to give a full exemption from tax on equity transactions, then increasing the holding period 12 months to 24 months would be one big expectation which I hope will come true or they could also toy with the idea of doing away with securities transaction tax (STT)  .”

When asked if the government had more room to manoeuvre Iyer said, “It is well known that the finance minister is in an unenviable position, she doesn’t really has much room to manoeuver, given that the revenues are critical, if the government has to undertake capital expenditure to kick start infrastructure spending. So for that I think it has to be a big balancing act.”

Answering a query on whether personal tax could be replaced by another avenue of generating income for the government Iyer said, “Doing away with personal tax and instead focusing on indirect tax is not a great idea because if you look at it if there was no personal tax and government’s entire revenue collection was coming through goods and services tax this would lead to personal inequity in the social structure where even the poor people have to pay more to buy goods and services because increased tax would come through GST.”

However, the government can certainly look at rationalising the tax structures, the tax slabs, she said.

Speaking about inheritance tax she said, “I don’t expect estate duty or inheritance tax to come in simply for the reason that earlier when the government actually took away the wealth tax, it really brought in the message that the cost of collection of this wealth tax or any form of wealth tax is much higher than what we actually collect. I don’t see estate duty or inheritance tax coming at all.”

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Budget Hotline: Govt may tweak income tax slabs to aid consumption, says PwC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Ahead of Budget 2020, CNBC-TV18’s special show ‘Budget Hotline’ gives its viewers an opportunity to put forth all their tax queries as well as share their expectations from the budget. Kuldip Kumar, Partner at PwC answers some of these queries.

Answering a query on whether a hike in tax rebate limit on housing loan is likely, he said, “The way the government is conducting meetings, discussing various aspects of the budget on what they can do to promote employment, revive growth, revive consumption, etc. I think housing sector could be one of that.”

“Last year the government had done away the taxation of second self-occupied house. Prior to this, if you had second house and even if it was let out, you were to pay tax on a deemed basis. Now, they made that change you don’t have to pay tax but the deduction for the interest still remains capped at Rs 2 lakh. So, if you are having 2 houses, 2 are self-occupied but the interest deduction remains capped at Rs 2 lakh. So, it is the right time probably for the government to raise the limit from Rs 2 lakh to probably Rs 3 lakh,” he said, adding that this would benefit the middle class, which would have more disposable income in their hands, which would ultimately boost consumption.

On educational allowance, he said, “For the last two decades the educational allowance which is exempt from tax is Rs 100 and for the hostel expenditure there is allowance is Rs 300 which is exempt from tax.”

He further added, “However, under Section 80(C), for two school going children, the full time education, and the tuition fee is also eligible for deduction under Section 80(C). But the Section 80(C) deduction limit is just Rs 1,50,000 and there are so many items of investment and expenditure are covered, one really hardly gets any push. So, there is scope for government may enhance the 80(C) limit from Rs 1,50,000 to say Rs 2 lakh or Rs 2,50,000 or alternatively they can allow a separate deduction for school children fee.”

According to him, the government may tinker with the income tax slabs and give more money through that route and do away with all these small exemptions.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Budget 2020: Do not expect changes in tax slabs, personal income tax rates, says EY India

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Ahead of Budget 2020, CNBC-TV18’s special show ‘Budget Hotline’ gives its viewers an opportunity to put forth all their tax queries as well as share their expectations from the budget.

Speaking on general expectation of cut in the personal income tax, Mayur Shah of EY India said, “I do not expect much changes in the budget as far as rates are concerned. However, I believe that 37 percent of surcharge can go down a bit.”

Shah also does not expect a change in tax slabs either. “Change in tax slabs would help but doubt the government would do that because with great difficulty the government has tried to bring most of the people under the tax net and by increasing the slab rate they would be removing them from the coverage. So, I doubt there will be anything in that respect which will happen,” he said.

Answering a query if there was a scope of the government bringing back exemption on medical expenses, Shah, said it was unlikely because standard deduction was introduced in lieu of medical expenses.

With regards to another query about offsetting losses from equity investments to get a tax credit, Shah said, “As far as losses are concerned, generally it never gets bifurcated based on the capital asset which you own. It gets bifurcated between short term and long term. So, if I have a short term loss, I can set it off against short term gains as well as long term gains. But if I have a long term loss, then I can set it off against only long term capital gains. There are situations where a person may not be able to set off the entire loss, then he can carry it forward for another 8 years and set it off against the gains, which will arise in future.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow