For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

Budget 2020: Tax Incentives To Individuals Could Help Boost Investment In A Slowing Economy

By Staff
|

The upcoming budget is of significance to the government as it is posed with a task of reviving the country's economy that is growing at the slowest pace in 11 years.

While individual taxpayers always look at the Union Budget presentation with hopes of favourable direct tax policies, the Finance Ministry has to strike a balance between revenue and exemptions to not breach the fiscal deficit target.

Tax Incentives To Individuals Could Help Boost Investment In A Slowing Economy
 

In recent months we have already seen how corporate tax rate cuts and rationalisation of the Goods and Services Tax (GST) was well received by the industry and foreign investors.

Experts suggest the similar tax favours to individual taxpayers could prove to be beneficial to the economy as well.

To start with, the government may benefit from providing tax benefits on investment-linked schemes. The exemption limit of Rs 1.5 lakh under section 80C has remained unchanged since 2014.

The Association of Mutual Funds of India (Amfi) suggested that if schemes like those that are debt-linked would be encouraged under the section, it would increase the participation of small investors in the debt market. Increased participation will lower costs, lower risk on investment and up the liquidity in secondary market.

Moreover, large borrowers, including the government, will be able to raise funds from the market towards various projects (like infrastructure development).

Further, tax on long-term capital gains (LTCG) from listed equities and equity-linked mutual funds, that were imposed in the Union Budget 2018 have had their negative implications. Apart from discouraging domestic investors to stay invested in stocks longer, the tax also makes large investments a tough sell to foreign investors as most developed nations that India competes with for capital do not impose it.

In fact, several FPIs (Foreign Portfolio Investors) have already reached out to the government seeking the removal of the tax.

Such tax-friendly changes in investment vehicles will encourage more capital flow into the economy.

As for more direct benefits, a rejig in tax slabs or introducing standard deduction in a progressive manner as per income levels, would allow more 'cash-in-hand' to the salaried class of taxpayers. Higher disposable income will encourage individuals to spend more, thus pushing consumption and demand of produce in the economy.

Read more about: budget 2020 income tax economy
Story first published: Friday, January 17, 2020, 15:30 [IST]
Company Search
Get Instant News Updates
Enable
x
Notification Settings X
Time Settings
Done
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more