Indian investors were looking forward to this budget and there was a hope to get some attention from the maiden budget speech of FM Smt. Nirmala Sitharaman. However there was nothing much in store for them. Much was expected by the middle class but there are no impetuses on their savings.
The Union Budget 2019-2020 was largely pragmatic, balanced, inclusive and progressive on many fronts. It has a clear focus on making India a US$5 trillion economy, transforming rural lives, enhancing ease of direct and indirect taxation, and strengthening connectivity infrastructure across India.
According to the Finance Minister, it is well within India’s capacity to reach the US$5 trillion economy vision within the next few years. In terms of actual delivery, budget had impact on sectors such as NBFC and Auto. This is likely to help out the stressed NBFC sector. PSU banks are likely to get Rs. 700 billion capital to step up lending. Electric vehicle have been given a push with a tax benefit up to 1.5 Lac INR. Similarly affordable housing has also got a boost from further tax benefit on interest of Rs. 1.5 Lacs. From the Investor’s point of view, following were the highlights of this Budget :
Retail Participation - The Government will take up necessary measures in consultation with RBI and SEBI to get retail investors to invest in treasury bills and securities issued by the government
ETF - To offer an investment option in Exchange Traded Funds (ETFs) on the lines of Equity Linked Savings Scheme (ELSS). This would also encourage long term investment in CPSEs
Income Tax - Pre-filled tax returns will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests etc. This will not only significantly reduce the time taken to file a tax return but will also ensure accuracy of reporting of income and taxes
PAN and Aadhaar - For ease and convenience of tax payers, PAN and Aadhaar can be used interchangeably for filing of returns
Less Cash - TDS of 2% on cash withdrawal exceeding Rs. 1 crore in a year from a bank account to promote cash-less economy
STT - To give relief in levy of Securities Transaction Tax (STT) by restricting it only to the difference between settlement and strike price in case of exercise of options
Social Stock Exchange - To initiate steps towards creating an electronic fund raising platform - a social stock exchange under the regulatory ambit of SEBI for listing social enterprises and voluntary organizations working for the realization of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund
Conclusion - Keep your Investments simple and stay invested in Equity markets through Mutual Funds route. Invest 50% of your ELSS investments for the FY 2019-20 at the current levels. Opt the SIP route to invest in Technology, Banking & Financial Services and FMCG sectors for long term.
We reiterate what we have been always saying - the Indian markets offer great potential for the long term investor. As such, budget announcements do not alter the economy or your investments. Happy Investing.
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About the expert: Manoj Garg : MBA, CPFA, IRDA Certified (LI+GI), Ex-Xaverian has a rich experience of more than 22 years in the Banking & Finance Industry. He has worked long years as Zonal Head (East) – Investment Division in ICICI Bank & IDBI Bank and as a Regional Vice President (East) of Tata Mutual Fund. He owns Simply Invest – A Mutual Funds advisory company.
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