The year 2020 was a roller coaster ride for investors, but benchmark indices managed to close the show with handsome return of about 15 percent each. The big winners of 2020 were the small & midcaps which will continue to remain in focus in 2021, suggest experts.
Despite a muted Budget for the stock market in the year 2020, retail investors jumped on D-Street. Data suggest that about 10 million new Demat accounts were opened last year amid the coronavirus outbreak which gave retail investors the extra time to study and manage stocks, according to media reports.
With an economy that is gradually reviving from a COVIDF-induced slump, all eyes will be on the Finance Minister, Nirmala Sitharaman, who will present the Union Budget on February 1.
On the stock market front, a lot of regulatory changes were announced by the SEBI over the last few months, to reduce systemic risks within the broking industry and to bring in additional transparency, suggest experts.
“While most stakeholders are acclimatizing to these new regulatory changes, the FM can extend support by certain measures, putting the investment and broking community on a strong footing. A few proposals that can bring cheer to retail investors,” Tejas Khoday, Co-Founder and CEO, FYERS told Moneycontrol.
We spoke to various experts and here’s what they think could cheer retail investors in the upcoming Budget:
Abolishing the much-criticized Long-Term Capital Gains (LTCG) tax
This would be a welcome move. A widely discussed point of note is redefining the concept of Long Term to 2 years and the change of taxation to Zero.
“This move can also bring stability to the duration of investments across financial assets,” suggest Khoday.
Budget highlighted that LTCG over Rs 1 lakh on listed equity shares will be taxable at the rate of 10% without the benefit of indexation.
Abolishing STT
LTCG and STT coexisting is acting as a deterrent to attract investment. STT was introduced with the objective to replace LTCG, but in Feb 2018 LTCG was reintroduced without abolishing STT.
STT or Securities Transaction Tax is a kind of transaction tax that is similar to tax collected at source (TCS). It is a direct levy on every purchase and sale of securities listed on the exchange.
“LTCG and STT coexisting is acting as a deterrent to attract investment. In the last 3 years, LTCG has not given any meaningful revenue to the government but has caused significant damage to capital markets thus doing away with LTCG will definitely make markets cheer,”
Indexation benefits to Equity-related Mutual Funds
Indexation helps investors pay taxes on the real value of investments as opposed to the nominal value. Currently, the government offers indexation benefits for investments in gold, Debt mutual funds, and real estate.
However, equity-related funds are not eligible. From 2018, Long-term capital gains (LTCG) are taxed at 10% without indexation benefits.
“The LTCG up to Rs.1 lakh is exempted from tax every year, the impact on the tax liability is not substantial. Also, this rule incentivizes investors to book profits every year as opposed to staying invested for a longer period,” Harsh Jain, Co-founder and COO, Groww told Moneycontrol.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
