Budget @10: 5 things that market wants from Nirmala Sitharaman

Analysts wish a relief in the form of either complete removal of security transaction tax (STT) or reduction for the cash market. They have had this demand for a few years now.

Even as Finance Minister Nirmala Sitharaman has said the interim Budget presented on February 1 will be a non-event, market expectations from it have not completely waned.

"I don’t want to be a spoilsport, but the 1st February Budget is just a vote on account; a budget to meet expenditure till the next government comes to power. No spectacular announcements, you will have to wait till after the general election," Sitharaman said in a conference last month.

Though a full-fledged budget will likely be presented in July, it is not beyond the realms of possibility that a few people-pleasing announcements will be made especially ahead of the general election. This may include a few announcements for stock market investors.

Removal of STT

Analysts wish a relief in the form of either complete removal of security transaction tax (STT) or a reduction for the cash market. They have had this demand for a few years now.

Introduced in 2004, STT is levied on transactions involving various types of securities. Increasing market participation has also led to higher tax collection in the form of STT for the government.

The government expected to collect Rs 27,625 crore from the securities transaction tax (STT) in FY24, which is 10.5 percent higher than the revised budget estimate of the preceding financial year. The budget for FY23 projected collections of Rs 20,000 crore, which was revised to Rs 25,000 crore on February 1, 2023 - a jump of 25 percent. In FY22, the government collected Rs 23,191 crore.

Relief on LTCG front

Analysts also expect some relief on long-term capital gains (LTCG) tax. They argue such relief may encourage more investors to invest money in stock markets. However, the government has not indicated any action on this long-standing demand so far. The demand has again gained traction as the GST collection has shot higher.

Currently, the government levies a 10 percent tax on cumulative profits exceeding Rs 1 lakh in a year, if the security is held for more than a year. For securities held for less than a year, short-term capital gains tax is levied at the rate of 15 percent.

Crypto markets hopeful

Even after years of speculation, there has been little progress in cryptocurrency regulation. Though the government has enabled Central Bank Digital Currency (CBDC), market players seek a more comprehensive policy.

“Considering the positive strides made in discussions at the G20 summit, we believe that it is crucial to establish a regulatory framework. These developments, especially in reducing TDS and Capital Gains Taxes, would encourage a more inclusive participation in the crypto market,” said Rahul Pagidipati, CEO, ZebPay.

“We remain hopeful for a budget that recognizes the dynamic nature of the industry and provides the necessary impetus for its continued positive trajectory in the coming year.”

Relief from double taxation on dividend

Currently the government levies tax on dividends in the hands of shareholders. However, since the dividend is already distributed after the company has paid taxes on its profits, this amounts to double taxation on dividends.

Some value investors like Vijay Kedia have expressed their discontent with the policy. Market participants believe any relief from this anomaly will be appreciated.

Policy announcements

Market analysts also expect some policy announcements or extensions of existing policies. For instance, they are also hoping for an extension of the second leg of its flagship incentive scheme for manufacturing electric vehicles (EVs) into the next financial year. Any positive development will likely help stocks like Tata Motors, TVS Motor and M&M rise further

The government had approved Phase II of the Faster Adoption and Manufacturing Electric Vehicles (FAME) Scheme with an outlay of Rs 10,000 Crore for three years commencing from 1st April 2019. It was further extended for one year.