The Budget 2022 has strongly focused on the macroeconomic factors but has made no big noise on the tax-related proposals. For individual taxpayers, it implies stability in personal finances as they can broadly continue with their current roadmap to achieve their long term wealth goal. What does the budget mean for you: For the majority of individual taxpayers, there were no tax sops announced. For an Individual, following the old taxation regime is still more beneficial in most cases.
A Rs 10 lakh salary income still attracts a NIL tax liability under the old regime. A welcome move for HNIs was limiting the surcharge at 15% on all LTCG, which helps them bring down taxation by 2.08% and 4.58% for HNIs earning more than `2cr and `5cr respectively.
While the government has introduced a digital rupee, there seems to be no intent to promote cryptocurrency or NFTs with a flat rate of taxation of 30%. The other disadvantage is in terms of no set-off provisions or no losses being allowed to carry forward. The loop-hole of bonus stripping has been plugged. However, this is applicable from April 1, 2022 onwards. From a portfolio standpoint, the budget was positive for equity as the focus is on long term growth of the country.
The sharp increase of 35% in capital spending with a special emphasis on infrastructure development, digital adoption, measures to improve ease of doing business, focus on startups and sunrise industries are all positive for the equity market. But on the other hand, there is little to cheer for fixed income.
Higher than expected government borrowing - for FY23, the supply increases with the government’s gross borrowing at Rs 14.98 lakh crore, against an expectation of Rs 12-12.5 lakh crore. Also, no news on India’s inclusion in the global bond indices was a let-down as the demand for the government bond could have strengthened the bond market. In effect, it would have reduced the cost of capital and bolstering India’s rating.
Feroze Azeez
Deputy CEO, Anand Rathi Wealth Limited