By Gaurav Bora , Market Expert
1st Budget of Modi 2.0 was not so encouraging for market as near time triggers were missing and there was no much relief for boosting consumer demand that’s why market reacted negatively to Budget. FM Nirmala Sitharaman has taken many measures to revive economy in longer term but some immediate relief was need. And as there is no relief in tax and money cannot be saved, then how consumer will spend?
Positives from Budget
· Targets to become a $3 trillion economy in FY20, $5 trillion in 5 years.
· Fiscal deficit projected at 3.3% in FY20 while earlier was 3.4%.
· Direct Tax Collection Jump 78% In FY19, direct tax revenue increased to Rs 11.37 lakh crore in FY19 from 6.38 lakh crore.
· Lower 25 percent corporate tax will apply on companies with up to Rs 400 crore turnover earlier it was 250 crore, covering 99.3 percent of corporate India.
· PSU Banks to get Rs 70,000 crore capital to boost credit.
· Govt to provide up to 1 Lac Crore during financial year, NBFCs should getting funds from Banks, MFs.
· NRI portfolio route to be merged with FPI for seamless investment in stock markets.
· NRIs to get Aadhar on arrival.
· To allow FIIs and FPIs investment in debt securities issued by NBFCs.
· Govt will start raising part of its gross borrowing programme in external markets in external currencies. India To Sell Sovereign Bonds Overseas. India’s sovereign external debt to GDP at less than 5 percent, among the lowest globally
· Government wants to establish India as a global hub of manufacturing electric vehicles. Ergo, it has moved the GST Council to reduce GST rate for EVs to 5 percent.
· Government to allow deduction of Rs 1.5 lakh on interest on loans to buy electric vehicles—resulting in benefits of Rs 2.5 lakh overall.
· To liberalise FDI in aviation, media, animation and insurance intermediaries
· Propose to give relief to Securities Transaction Tax (STT) on exercise of options.
· To bring ETFs in line with ELSS of mutual funds to encourage retail investors.
· Proposes setting up 1.95 crore houses under Pradhan Mantari Awas Yojna and offers additional tax deduction of Rs 1.50 lakh on interest paid on home loans taken up to March 2020.
· The Affordable Housing Push – Enhanced interest deduction of Rs 3.5 lakh for affordable home buyers. Additional tax deduction on home loan interest for houses worth up to Rs 45 lakh.
· Startups who provide details in returns will have no scrutiny in respect of valuation of share premium. Period of exemption from capital gains from sale of startups extended.
· Startups will not be required to justify fair market value of shares issued to investors in Category II Alternative Investment Funds.
Negatives from Budget
· To Raise Minimum Public Shareholding Limit To 35% from 25%.
· LTCG remains the pain for investor.
· Highest income earners need to pay more tax, raises tax on income earnings above Rs2 to 5 Crore and 5 crore and more raised. Highest in the world even more than US which 42%.
· Government Disinvestment Target Set At Rs 1.05 lakh Crore, higher than Rs 90,000 crore of last year. Government will continue with PSU stake sales to meet the disinvestment target
· Increased customs duty on gold to 12.5% from 10%.
· Proposes added excise duty of Re1/liter on petrol and diesel.
· RBI to get more powers to supervise NBFCs, this shows current regulatory is not able to regulate NBFCs and it will increase compliance issues.
· Proposed to extend the buy back tax at 20 percent to listed companies, the step is taken to discourage the practice of avoiding Dividend Distribution Tax (DDT) through buyback of shares by listed
· Basic customs duty on auto parts, optical fibres, certain synthetic rubber hiked
I feel this negative reaction of market will be limited to today’s trading session only. As market have seen interim budget 3 months ago only so street was not having much expectations from this budget so market will not react much on this budget. But govt has opened foreign fund flows gates through ease in NRI & FPI norms and sovereign external debt bonds, this is positive surprise for markets.