Budget 2026 unlikely to offer tax relief; focus may shift to asset monetisation, credit revival: Ace investors

Manish Chokhani, Director at Enam Holdings, said the scope for further tax cuts is limited. “They have already cut your direct taxes. They have already cut your indirect taxes. So, there is nothing to look forward to on that side,” he said.

• Little chance of tax hikes or major relief in upcoming Union Budget, say investors
• Focus remains on reviving growth and boosting credit flow
• Further tax cuts unlikely; asset sales may aid resource mobilisation, says Raamdeo Agrawal

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Veteran investor Raamdeo Agrawal, Chairman and Co-founder of Motilal Oswal Financial Services, said there was little chance of any tax hike or meaningful tax relief in the upcoming Union Budget, as the government has already undertaken substantial direct and indirect tax cuts and is now focused on reviving growth. They were speaking at a CNBC-TV18 event in Mumbai on January 13.

“There is no question of raising the tax rate, because otherwise they would not have brought down the GST from 28 percent to 18 percent. It’s quite a budget in itself,” Agrawal said, adding that the government has already “opened the hands”.

He said raising taxes would not help if economic growth remains weak. “If the economy is not growing, any kind of tax rate is nominal. First, you’ve got to get the tailwind happening in the economy,” he said.

Agrawal said reviving credit growth was critical and pointed out that credit flow had earlier been curtailed, possibly to control inflation. “They have beaten down the credit flow for whatever reason. Now, they’ve got to get it back to 40 to 50 percent credit flow. That will give you 11 to 12 percent nominal growth and then it’s all evergreen,” he said.

He said recent policy actions show that stimulus has already started. “Look at what they do, not what they say. What they’ve done is stimulate,” Agrawal said. He pointed to a cumulative 125 basis point cut in interest rates, credit growth improving from 8 to 9 percent to 10.5 to 12 percent, a sharp reduction in GST rates, and an increase in the income tax exemption limit from Rs 6 lakh to Rs 12 lakh.

On the budget outlook, Agrawal said expectations should be moderate. “What more can they do? They can further cut interest rates by another percentage or so. Toh kuch kharab nahi hoga budget mein, kuch achha ho sakta hai, kaafi nahi,” he said. He added that the government’s priority remains getting taxation right rather than rolling back existing levies.

Manish Chokhani, Director at Enam Holdings, said the scope for further tax cuts is limited. “They have already cut your direct taxes. They have already cut your indirect taxes. So, there is nothing to look forward to on that side,” he said.

Chokhani said the next phase of resource mobilisation may have to come from the public sector, particularly through asset sales. “The resource-raising exercise must come now from the public sector. If some of those assets go cheap through private hands, like it started in 2000–03 in the Vajpayee era, it re-ignites animal spirits,” he said.

He said private sector investment remains subdued amid global uncertainty. “The private sector is clearly not opening the purse strings. They are very uncertain about what’s happening in the world right now,” he said, adding that steps such as privatisation, disinvestment, or new PLI-type schemes could help revive sentiment.

Chokhani also said recent labour reforms have added to cost pressures. “Even the labour codes which have come have increased the accounting costs for companies. So, you need to give a profit fillip to the private sector,” he said.

On taxation, Chokhani said it is not a primary concern for him as an investor. “Tax, I don’t honestly think about. Let’s first think about making money,” he said. He added that optimism is integral to the profession. “You wake up optimistic every day looking at the bright side of things. I don’t wake up worrying and chewing my nails.”

On capital gains, Chokhani said any rollback in rates would at best provide a short-term sentiment boost but would not materially change market outcomes. “If you don’t make money, then how does it matter? It is a sentiment booster for sure, but I don’t think it’s a game changer,” he said, especially at a time when government revenues are under pressure.

He termed capital gains taxation a “red herring”, saying it creates unnecessary friction, particularly for foreign investors. “It creates friction for everybody, including foreigners, in fund accounting, NAV calculation and taxes when money comes in and goes out. It’s just wasting time,” he said.

From an investor’s perspective, Chokhani said returns matter far more than marginal changes in tax rates. “I’d rather make a 25 percent gain and pay a 12.5 percent tax than make a 12 percent gain and pay a 10 percent tax,” he said, adding that the real focus should be on reviving animal spirits among entrepreneurs, as markets ultimately ride on business growth rather than tax tweaks.