The biggest positive trigger for Dalal Street in the upcoming Union Budget 2022 could be any abolition of Securities Transaction Tax (STT).
Market participants will also look forward to a re-examination of laws dealing with withholding tax on dividends, withdrawal of LTCG on all equity schemes, removing tax arbitrage between mutual funds and insurance in terms of switching, and clarifying tax aspects on F&O trades, Mehta Group said in a report.
The new normal these days is 'Work-from-home'. The Budget should introduce a standard deduction for additional expenditure incurred by salaried class to meet communication and infrastructure requirements. Also, the government should consider increasing the limit of interest deduction paid on home loans as the pandemic has accelerated demand for bigger new homes to accommodate working space. So, incentives to support the real estate sector may include higher tax exemptions on interest and principal payments on housing loans. This will help the real estate sector immensely, the report said.
The theme of the Budget will continue to revolve around Covid-19 (increase in healthcare spending). Extra provisioning for vaccine-related costs is likely. The government is expected to focus on stepping up spending in priority sectors such as healthcare, the social sector, education, and support to sectors like hospitality, retail, aviation, infrastructure, agriculture, construction, and housing, the report said.
The street will watch if the government is able to reverse the economic downturn caused by Covid-19 which has led to severe financial disruption at both industrial and individual levels.
The government should consider curtailing the scope of transactions covered under TDS compliances, relaxations to non-resident taxpayers in return filing compliances where taxes have been appropriately withheld and provide clarifications on certain vexed issues particularly on the new charge of Equalisation levy and TDS/TCS provisions on e-commerce and also abolish applicability of Income Computation and Disclosure Standards, the report said.
Commanding attention would be a revival of the economy especially through employment creation especially for less-skilled workers, to boost income and demand. The creation of jobs is of paramount importance to revive the growth engine of India. We suspect the government will give sops to labour-intensive industries like construction, housing, road-building, and irrigation, the report said.