From individual investors' perspective, the Budget may not be as lacklustre as it is on the macroeconomic front. The direct benefits include higher exemption limit in personal tax, exemption up to Rs 10,000 for interest on savings and 50 per cent exemption on investments of up to Rs 50,000 in equities. There could be a minor impact with the 20 per cent reduction in STT.
For SME promoters and HNIs, indirect benefits arise from capital gains exemption from residential property (provided proceeds are used for business expansion) and simplification of the existing multi-tier structure of DDT. No change in corporate taxes is a positive. However, some of the positives could be negated through wider service tax net at a higher rate of 12 per cent, instead of 10 per cent, and increased excise duty on luxury cars. Turnover limit for compulsory tax audit being raised from Rs 60 lakh to Rs 1 crore will provide some respite to SMEs.
Due to lack of a clear plan for fiscal consolidation, the expectation on softening interest rates by the Reserve Bank of India could be lower. This could keep interest on fixed income products higher. Tax-free bonds (doubled from Rs 30,000 crore last year to Rs 60,000 crore) will continue to see huge interest. Doubling of import duty on gold from two per cent to four per cent may not have a significant impact on demand.
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