Budget 2020: A stock market investor’s wish list from FM Nirmala Sitharaman

Ashish Pandey
Budget 2020, Union Budget 2020 India, Budget 2020 India, Budget 2020-21

Budget 2020 India: As the budget day closes in, different sectors of the economy are keeping their fingers crossed expecting the finance minister to address their demands on February 1, 2020. The equity markets, too, have their set of wish lists and expectations. The major expectations of the stock markets are related to securities transaction tax (STT) and long term capital gains (LTCG) tax. Here are three possible scenarios, according to the brokerage firm Dolat Capital, that may impact the equity markets:

  • The securities transaction tax (STT) may be retained while making long term capital gain (LTCG) tax zero after one year. It is expected to cheer the domestic HNIs and FPIs. However, market liquidity makers will be disappointed. The scenario, however, appears unlikely.
  • The government may retain STT  while making LTCG zero from one to two years and short term till two years. The STT could be reduced to half. The move may be looked as negative for investors in the near term but traders would be happy. The scenario looks likely.
  • There may be no change to any equity tax structure. The impact is expected to bring a big disappointment. The scenario, however, looks unlikely.

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However, the government may not introduce any changes to the existing market taxation structure, according to Dolat Capital. "STT collection for FY18 was INR 11,881 crores (USD 1.7 bn) and RS. 12800 cr (USD 1.8 bn) for FY19. With these reasonable collection estimates in place, it is difficult to predict if the government would be willing to part with the existing equity market taxation." Finance Minister Nirmala Sitharaman is slated to present the budget on February 1, 2019. The budget is expected to be watched closely amid the ongoing slowdown in the economy. The government's first advance estimates for the economy estimated the GDP growth to be at 5 per cent in FY20.