Here's a rough guide to what the mutual fund industry prioritises for the finance minister, this time around.
Mutual Funds:
- Equity fund of funds, gold ETFs and real estate mutual funds getting the same tax treatment as Equity Funds.
- Rationalisation of double incidence of securities transaction tax (STT) on mutual fund units and the underlying share purchases. This anomaly should be removed this year around.
- Bringing equity funds and debt-oriented funds on par with respect to capital gains treatment.
- Removal of dividend distribution tax for debt mutual funds.
- Limits on overseas investments for domestic fund houses to be increased further -- each fund house should get a limit of at least $500 million.
- Clear guidelines to enable the marketing of International Mutual Funds to residents under the $50,000 p.a. limit. This will help investors diversify their portfolio.
- Private sector asset management companies being allowed to manage pension funds.
- Sanction to new products like commodity-based funds, real estate investment trusts is awaited eagerly by all players in the market.
- Opening of the mutual funds for non Indian, non-FII investors.
- Mutual funds should be encouraged to go retail. Post Office and public sector Banks can play a big role.
Markets:
- Hope the Budget will not tinker with any rates related to STT or capital gains taxes.
- Pension and insurance sector reforms
- Development of debt markets -- rationalisation of stamp duties, removal of TDS on bonds. The government should allow hedging instruments that could allow speculative participations to increase thus, providing the necessary depth to the bond market.
- Further push for financial sector reforms; creation of Indian depository receipts.
Tax:
- Reduction in corporate and personal tax rates and raising of the individual taxable income thresholds.
- Eliminate surcharge of 10% on corporate and personal tax.
- Review of the Sec 80 C ceiling of Rs 100,000 - hike in the limit eligible for deduction under Section 80 C from the current Rs 100,000 to Rs 200,000 is expected.
- Tax exemption on infrastructure related bonds issued by banks and private entities to facilitate the spending on this vital area.
- Increase the number of taxpayers -- Post Office could be used as a nodal agency in supporting IT authorities in collecting the PAN application form.
Economy:
- Reducing the fiscal deficit through curtailment of expenditure and phasing out of subsidies.
- Clearly articulated infrastructure development policy - Infrastructure bottlenecks can choke our entire growth momentum. Strong funding, public-private partnerships, plus tax incentives for infrastructure investments are expected in the budget. Create instruments for financing of long-term infrastructure projects. Permit foreign participation in these instruments.
- Address implementation issues - rather than increase expenditure allocations. Ensure that every rupee of social spending reaches the appropriate pocket.
- Pushing ahead with next generation reforms to attract more FDI flows.
- Providing further fillip to exports.
- Clear road map for the national level Goods & Services Tax is important - this is expected to benefit the economy as it widens the tax net, bringing in the unorganised sector. More services should be brought under the Service Tax net and the rate needs to be increased.
- Rural development - this is critical, as 60% of the population is producing less than 20% of the GDP. Hence need to create meaningful employment and development opportunities.
- Urban Renewal - the Delhi Metro Rail has shown what can be done. This needs to be rolled out for the top 8 Metros.
- Customs Duties - these will be lowered in keeping with our Asean aspirations.
- Increase thrust on education, health and agriculture.
- Road map for SLR reduction would certainly be a big positive.
- Tourism industry should be given a fillip through tax holidays.
- Real estate sector reform should be introduced - Central government taxes, though it is a state subject, should charge a cess for every square feet of transaction both housing and commercial properties. Budget should focus on unearthing black money by imposing a penalty on all transaction in housing sector below the price provided by the state government.
- Public sector enterprises (PSE) reform - Government should initiate sale of non-core PSU to private sector and fund raised out of sale of these assets should be used to fund infrastructure projects including social projects.
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