Navigating the Shifting Sands of India's Budget 2024: Insights from Financial Experts

The Union Budget 2024 has been a topic of intense discussion, with investors and financial experts closely analyzing its impact on the country's economic landscape. While the overall budget may be positive for the nation's growth and prosperity, it has left some investors in a state of mental anguish, particularly due to the changes in capital gains taxation.

Unlocking the Potential: A Comprehensive Analysis of Budget 2024's Impact

Simplifying the Tax Structure: A Balanced Approach

Prashant Mishra, the Founder of Agnam Advisors, believes that the Union Budget 2024 presents a balanced approach that focuses on simplifying the tax structure. While the tax percentage has increased, the standardization of the holding period for short-term capital gains (STCG) on non-listed equity assets to 24 months will help investors plan their long-term strategic investments and aid in better investment planning. Mishra emphasizes the importance of a predictable tax environment for sustaining long-term growth and maximizing returns. The abolition of the Angel Tax is also seen as a welcome move towards supporting start-up growth and innovation, providing new opportunities for venture and private equity investments.

Navigating the Personal Income Tax Landscape

Rahul Jain, the President and Head of Nuvama Wealth, highlights two notable positive changes in the personal income tax regime. Firstly, the standard deduction has been increased by 50% to ₹75,000, and secondly, the income tax slabs have been revised, with the lowest slab now extending up to ₹7 lakh. These changes will reduce the tax liability for those who choose the new regime, potentially saving up to ₹17,500, as mentioned in the budget speech. Jain believes that this will help boost personal consumption, which has slowed down in recent times.However, the news is not entirely positive for investors, as the tax liability on capital gains has increased. The short-term capital gains tax on listed financial assets has risen from 15% to 20%, and the long-term capital gains tax on listed financial assets has been raised from 10% to 12.5%. While this may negatively impact sentiments in the short term, Jain suggests that it will encourage investors to take a long-term view of their investments, especially in the equity market.

Balancing Fiscal Prudence and Strategic Spending

Dr. Mukesh Jindal, the Founder of Alpha Capital, describes the Union Budget 2024 as a mix of fiscal prudence and strategic spending, with the government tightening its purse strings on capital gain taxes while boosting capital expenditure for infrastructure. However, the unchanged allocations for critical sectors like education and healthcare have left many hoping for more, as these are key to the nation's long-term growth and well-being. Jindal believes that the budget has been cautious with its resources, aiming for economic stability but at the cost of potential investments in the social fabric of India.

Simplification and Rationalization: A Boon for Taxpayers

Swetha Kochar, the Founder and Partner of PKC Management Consulting, highlights the simplification efforts in the Union Budget 2024. The reassessment and reopening of returns filed for earlier years have been reduced from 10 years to 6 years, including in search cases, which is a significant relief for taxpayers. Additionally, the period for non-financial assets to qualify as long-term capital gains (LTCG) has been brought down to 2 years, and the LTCG rate on the sale of land, gold, and some other assets has been lowered to 12.5% from 20%, despite the removal of indexation. Kochar believes that these changes will benefit most taxpayers, even though the LTCG on shares has been increased from 10% to 12.5%.

Fostering Employment, Skilling, and the Middle Class

Alekh Yadav, the Head of Investment Products at Sanctum Wealth, highlights the Union Budget 2024's focus on employment, skilling, MSMEs, and the middle class. The government has introduced measures to incentivize job creation and enhance skilling programs, while also implementing incremental personal income tax rationalization and urban development initiatives aimed at benefiting the middle class. Yadav notes that fiscal prudence is maintained, with a lower fiscal deficit and gross borrowing compared to the interim budget, which is viewed positively in fixed income markets. However, the increase in capital gains tax for equity markets and the increase in STT on F&O have been met with negative market reactions.Overall, the Union Budget 2024 has presented a mixed bag of changes, with both positive and negative implications for investors and taxpayers. While the government has focused on simplifying the tax structure, boosting infrastructure, and supporting the middle class, the increased capital gains taxes have left some investors in a state of uncertainty. As the nation navigates these shifting sands, it will be crucial for investors and financial experts to stay informed and adapt their strategies accordingly.