Over the past four years the Government of India has undertaken various initiatives to try and improve the economy and sentiments from the scenario in the year 2014. In its endeavour to achieve this, the government has witnessed its share of highs and lows with decisions such as Demonetisation, GST, Introduction of LTCG tax just to a name a few.
At this juncture, we believe that ensuring “policy stability” is critical for the growth of the economy. A policy stable environment will also help ensure that the citizens will continue to receive the benefits of the programmes that have been rolled out so far.
With an aim to strike a “winning” balance between politics and economic growth, the Government of India could introduce some popular measures in the forthcoming interim budget that will address some the concerns and elevate the overall sentiments.
Some of the tax relief and other measures that could be considered are:
- Long Term Capital Gain Tax ( LTCG ) The government should consider withdrawing this tax. It will help improve the sentiment and make the equity market an attractive option once again
- Securities Transaction Tax (STT) – The industry is currently facing different STT levies in different types of transactions. The government should reconsider how the STT is being currently levied and if possible reduce the tax. This will help improve the equity funding and provide relief to the capital markets.
- Increase Tax Exemption Limit from 2.5 lakhs to 5 lakhs– Currently the citizens falling under the bracket of 2.5 lakhs to 5 lakhs bracket pay about a 5 percent tax. The government could consider giving a tax and procedural relief to this low income group.
Introduction of Quasi Basic Scheme (QUBI): The Finance Minister could introduce this scheme to target poorest segment of the population.
These measures would not only help address the short term liquidity challenges but also have significant positive impact in a longer term perspective.
We are hopeful that growth with stability with a long term view will be the underlying theme of any initiatives /measures/ programmes that the government wishes to roll out at this time.
(Views expressed in this article are personal opinion of Anand Rathi, Chairman, Anand Rathi Group)