CIO Speak: Beyond the headline...

There was a time, the heady days of the pre-digital era, when we had to wait for the Union Budget document to be released. This meant waiting till evening on the budget day to get a physical copy of the budget and then poring over it through the night to slice and dice the minutiae of the Union Budget. Those days are clearly behind us. Today, budget analysis fly quick and comprehensive almost at the same speed as the announcements are made by the FM. Inevitably, everyone wants an eye-catching headline! Times have definitely changed. What has not changed is our focus on taxation – the common man, HNI/UHNIs, or corporates – its taxation for which everyone tunes in! From that perspective, the FM did not disappoint and made several taxation related announcements in the budget.

Highlights

• The FM has proposed that longterm gains on all financial and non-financial assets would now be taxed at 12.5% instead of a tiered structure, thereby abandoning indexation.
• The other announcement to ruminate over is the 25% increase in LTCG. With this move, all asset classes are brought to a level playing field, from the perspective of LTCG.
• Over the last 2 years, we have witnessed a surge in equity market participation as most investors view listed equities as a proxy to the India growth story. This is inevitably leading to crowding out in the listed equities space. With standardised LTCG, taxation will no longer serve as a differentiating factor, thereby ensuring that allocations are more merit oriented. This will also help in removing froth from the listed equity space.
• The removal of angel tax cannot be viewed as anything but good. This will inevitably create a more conducive environment for startups in India, reduce administrative burden on startups, enable them to focus more on innovation and growth, and give a fillip to the funding ecosystem.