The Union Budget 2020, will be very important from a stock market perspective, as there are several things that investors would look for. Here are 4 things that they would keep an eye on.
1. Long Term Capital Gains (LTCG) Tax on Equities
There has been mounting speculation that the government may do away with Long Term Capital Gains Tax on shares. Some reports also suggest that the government would tweak the LTCG to increase the limit to 2 years or above. Currently, if you sell equity shares after a period of one year, it attracts a Long Term Capital Gains tax of 10 per cent, plus cess.
Doing away with this would bring some relief to investors in equity shares and equity mutual funds.
2. Doing away with Dividend Distribution Tax
Investors are looking at the possibility of the government completely doing away with Dividend Distribution Tax. Presently, there is a tax that is paid on dividends distributed, which is paid by the company paying the dividends.
If this were to be done away with high dividend paying stocks, like ONGC, Vedanta, Hindustan Zinc, Coal India and Oil India could benefit. However, at the moment considering the government's fiscal situation this looks highly unlikely.
3. Cut in income tax
Benefits to individuals through a cut in income tax rates or hiking the 80C limit could push markets higher. This is because higher disposable income would push demand higher. Apart from this, a hike in the 80C limit is likely to see money pour into ELSS, which invest in equity shares.
4. Fiscal deficit
This is also a number that the market investors await. The fiscal deficit is expected to rise to 3.8 per cent, from the targeted 3.3 per cent. If it hits the 4 per cent of GDP mark, investors are not going to like the same.
At the moment, it is difficult to predict, which way the Budget could go. Given the precarious nature of government finances, it is unlikely that too many goodies would be rolled out.