Budget Analysis 2024

 

Opportunities

1. • General state of economy – very good 
     • Fiscal deficit @ 4.9% and path towards reduction
     • Allocations – Infra (11 lakhs), Housing (10 lakhs), Defence (4.5 lakh), Rural (2.66 lakh), Agri (1.5 lakh) , Education (1.25 lakh), IT & Telecom (1.1 lakh)
   • Investment Strategy 
     • Sector funds – Sector Indices – ETF
   • Long Term gains of Equity Markets – 
     • Book your long term gains @ 12.5% – future tax may be higher – Rebuy the same
     • Portfolio rebalancing will also happen
     • Investors will be encouraged to book long term gains at much shorter intervals
     • PMS and profit share models expensive
   • Investment Properties 
     • Not so attractive
     • Property gains @ 5-7% and inflation index @ 5-7% => Profit hedge has gone!
     • If property has gone up in value – consider selling to minimize future tax impact
     • If there is zero or negligible appreciation – sell it & use money elsewhere – 
       • Loss carry forward is not available 
       • tomorrow they will bring another form of tax (e.g. estate tax)
     • If not making money – sell it anyways and invest better
     • Buy property in the company… 

Overall View

1. • FOCUS – FARMER, YOUTH, AGRICULTURE, BIHAR, ANDHRA, RURAL POOR
   • Upliftment, Empowerment, General prosperity AWAS, FISCAL under 4.9%, Tourism
   • Large capex to keep economy running super fast – that is intact
   • Socialist agenda is good – individual agenda bad – EARN – PAY TAXES & SPEND!

Taxation – Guidance

1. • Want to do a comprehensive review on one side
   • But then many tax measures that are not meaningful – TDS & TCS
     • Eg TCS – the one who will travel / educate will do
     • increase in CGT – short term will keep doing this even if the rate is 
     • increase in STT – will not deter traders
     • Re-Introduction of LTCG with STT
     • TDS u/s 194T for payment of sal, comm, bonus, interest to partners of partnership co.
     • TCS on sale of cars
   • Just continuously keep taxing the wealthy – not good – this will trigger migration
   • Creating more difficulty and more administrative hassles

Income Tax & TDS

1. • Old regime is still better provided you have deductions especially of home loan
   • Only two holding periods 12 & 24 for listed and unlisted respectively.
   • TDS rates reduced from 5% to 2% eg. insurance policy, commission and brokerage – good
   • TCS rationalisation for adjusting from salaried persons also – good
   • Income from house property to be filed under that same section only
   • 194-IA – TDS on sales of property to multiple owners (<50lakhs) will all be aggregated so as to not escape TDS
   • Cannot travel unless you have IT clearance 
   • Company can take 14% deduction as contribution 

Capital Gain Taxes – Equity markets

1. • STCG @ 20% & LTCG @ 12.5%
   • Sentiment spoiler. Stability of rates is important.
   • Hardly of any use – the government will hardly get much. 
   • Government wants to push middle class out of trading; that is excessive control
   • Let’s get ready to have cap gain income added to slab rates.
   • Don’t sell too much. Don’t sell your old ULIP policies – they are gold !!

Others – What is cheaper & what is expensive

1. • Cheaper – aquafarming & marine, shea nuts, critical minerals, steel and copper, textile leather, precious metals – gold and silver, medical equipment, IT electronics, renewable energy, shipping, cap goods for petroleum
   • Dearer – Plastic, lab chem, nuts,

Development programs of last 10 years

1. • Har Ghar Jal
   • Housing for all
   • Electricity for all
   • Cooking Gas for all
   • Bank accounts and Fin Services for all

On General Prosperity

1. • Support to raise MSP for farmers
   • 2.7 Lk Cr saved by Govt by doing 34 Lk Cr of DBT using Jan Dhan i.e. leakage avoided
   • Street vendors, freedom from multidimensional poverty
   • Fiscal Deficit target at 5.1% Below 4.5% by FY 26
     • Big positive for Banks – more money in the system – more loans and thus more profits
   • Real Estate
     • 1 Cr new houses under Awas
     • Buy or Build Program to be launched
   • Tourism
     • G20 in 60 countries
     • Spiritual tourism
   • Entrepreneurship
     • 43 crore loans aggregating to ` 22.5 lakh crore for entrepreneurial aspirations
     • EV charging stations as a career option
     • Start up – long term funding especially for deep tech for defence

On Upliftment

1. • Skill India 1.4 Cr trained
   • Sports for youth
   • Focus on eastern region
   • Blue Economy 2.0
     • Free electricity – 1cr households enabled with solar rooftop to get 300 units pm free.
   • Infrastructure – 
     • outlay of 11% … ultimately 3.4% of GDP
     • Airports doubles, 500 new routes, 1000 new aircrafts
   • Railway – 
     • 40k coaches to vande bharat standard
     • 3 railway corridors – energy ports and high density under GatiShakti

On Empowerment 

1. • Lakhpati Didi – fueling consumerism

 

 

Budget Analysis 2023

 

Positives

• Across industries and across socio economic section
• Tremendous focus on Green & rightly so
• Infra Investment – 10 Lakh crore
• Small savings reforms and thus big boost to retirement planning for masses

 

Investments

• POMIS to 9 lakh & joint account to 15 lakh
• SCSS – limit doubled to 30 lakhs; so 60 lakhs in all
• MSSC – 2 years @ 7.5%

 

Clear Opportunities

• Consumer / FMCG – Per capita doubles and moves on
• Tourism – 50 destinations, jobs creation, etc
• Green Growth – Across the board, Green Hydrogen
• Sugar – ethanol blending 
• Infrastructure – 50 more airports
• Fertiliser industry
• Agriculture – Agri Accelerator Fund

 

Taxation – General 

• New regime 
  • 25% Slab removed
  • Rebate u/s 87A was available in the old regime – same rebate is given upto 7 lakhs in new regime. So no tax upto 7 lakhs no income tax. This is a big plus for the entire middle class of the country. Crores of people stand to benefit.
  • Standard deduction is also available upto Rs. 50,000 
  • Surcharge above 50L is 10%, 1 cr is 15%, 2 cr is 25% and above 5 cr is 25%
  • Heath and education cess stays at 4%
  • Salaried can switch between old and new regimes as much as they like; business owners cannot switch back to old if new regime is opted for.
  • Default scheme unless opted for old regime; 
    • This is not as simple as it sounds
    • This is detrimental as Indians we do not have social security; hence if savings are not forced via tax incentives, people will not save. This is extremely detrimental to the financial well being of people. 
    • Thus at the moment DO NOT OPT for this new regime; that’s my view
• Old regime
  • Surcharge above 50L is 10%, 1 cr is 15%, 2 cr is 25% and above 5 cr is 37%
  • Heath and education cess stays at 4%
• Leave encashment cap, at retirement, now at Rs. 25 lakhs v/s 3 lakhs. So tax is payable only on LE proceeds above Rs. 25 lakhs.
• Gifting to non-residents (not ordinarily resident), above Rs. 50,000 by residents was escaping tax – hence taxed. 
• Gold conversion, from physical to EGR. This will not be treated as capital gain. This hurdle was removed to promote electronic holding. But this is not relevant to most people in my view as we can hold an ETF. This is more for gold traders.
• Custom duty was raised on gold and silver. Imitation jewellery will also cost more.
• Lab grown diamonds will cost less as custom duty is reduced from 5% to zero.
• Imported Toys, Bicycle, Cars to cost more

 

Taxation – TCS, TDS & Administration

• TCS on holiday packages increased from 5% to 20%. This is not so good for travel companies – as the cost moves up significantly for holiday goers. 
• TDS on gaming and winning from online platforms @ 30%
• TDS to be levied at a reduced rate of 20% on payment made from provident funds.
• For refiling of returns in response to notice of reassessment; time extended to 3 months.

 

Taxation – Capital markets

• TDS for NRIs to be deducted at lower of 20% or as per the DTAA treaty for mutual fund investments. 

 

Taxation – Housing & Real Estate

• Interest payments that were added to cost of acquisition will be disallowed when property is sold. This is correction of an anomaly hence a prudent measure.
• Concession in rent and rent free accommodation as perquisites were available to employees; now the method of computation is going to change. We have to wait and see the new method prescribed.
• Cap gain on property – restricted to 10 crores – so any cap gain above 10 crores will be taxed, you pay the relevant tax and then you can buy your new property or invest the money elsewhere
• Besides interest, dividend, rental if any payment is made under the heading of Repayment of debt in REITs, InvITs then that will be taxable. If this includes capital invested then that portion is reduced and balance is taxed. If it is actually just repayment of capital invested via redemption of units then this is not taxable. 
• Lower TDS in case of income from such business trusts.
• In case of Joint Development agreement; Transfer of capital asset includes full value of consideration plus other benefits received (via cash or cheque). Drafting mistake has been fixed.

 

Taxation – Business owner

• Presumption tax u/s 44AD – limits raised to 3cr and 75 lakh from earlier 2cr & 50 lakh; audit requirement continues.
• Business owners cannot opt in and out of new regime; salaried can at will – to whichever is better
• Start-ups get to set-off of losses up to 10 years now instead of 7

 

Taxation – Fixed Income 

• MLD’s touted as a tax arbitrage product, where tax was at 10% without indexation is now not as tax efficient. This anomaly is resolved and this is now taxed at debt based short term cap gain rates.
• TDS @ 10% will be levied on interest earned from listed debentures.
• HNIs may find it better to move to debt funds offered by Mutual Funds.

 

Taxation – Insurance

• Insurance bonuses / loyalty additions / all sort of income is going to be taxable if premium exceeds Rs. 5 lakhs w.e.f from 1st April 2023. 
• This brings insurance products on par with taxation of banks etc., the key thing is insurance can still give you guaranteed rates which FD’s cannot.
• Death benefit will continue to be tax free u/s 10(10D)
• Term insurance products are the largest beneficiaries
• Endowment and moneyback is worst affected; however this is only for high value insurance taken by HNIs
• For most people there might not be much to worry