Get More Info

  • Views Search

    Portfolio Tracker
  • : An 'A' for PC!
  • OUTLOOK ARENA  >>   VIEWS ON NEWS >>  JULY 8, 2004

    An 'A' for PC!

    Even though the stock markets have not responded enthusiastically to the budget, the Finance Minister in our view, deserves an 'A' for his effort. The retail investor will surely support this view.

    As far as you, the retail investor is concerned, our view is that the net impact of the budget is positive.

    First, the bad news -

    We all will now have to pay a 2% cess i.e. if your tax liability is Rs 100, you will need to pay Rs 102. However, all tax payers in the above Rs 850,000 pa bracket, will pay a surcharge of 10%.

    Second, dividends declared on investments in debt mutual funds (including monthly income plans) by individuals and HUFs will continue to attract a distribution tax of 12.5% plus surcharge (this rate has been enhanced to 20% plus surcharge in case of investments made by corporates). The much needed respite for retail investors has not been provided.

    Third, a tax of 0.15% of the transaction value will be levied on securities traded over the stock exchanges (if you buy shares worth Rs 100,000, you will have to pay Rs 150 to the government).

    From the retail investor's standpoint, the last two points are not really negatives. The dividend distribution tax already existed and the transaction tax has been introduced in view of the changes having been made to the capital gains tax regime.

    Now, the great news!

    One, the returns offered by the small savings schemes have been maintained at existing levels. The PPF will continue to pay 8% pa. The GOI Bonds (Relief Bond) too will continue to exist in its present avatar. In other words, the declining interest regime, atleast for now, has come to an end.

    Two, senior citizens will finally have a dedicated savings scheme - the Senior Citizens Savings Scheme, which will yield 9% pa. The LIC Varishta Pension Bima Yojana, which anyways met with only lukewarm response, will be discontinued.

    Three, the capital gains tax regime has been changed to benefit all. There will no longer be any long term capital gains tax on securities traded on the stock exchange (earlier 10% without indexation or 20% with indexation, whichever was lower). Also, short term capital gains tax will now reduced to a flat rate of 10% (earlier taxed at marginal rate of income tax). Open ended mutual funds (do not qualify as tradable securities) will however continue to attract capital gains tax as earlier.

    Four, the exemption from the levy of dividend distribution tax by equity mutual funds has been extended. This means that dividends on equity and equity-oriented schemes are tax-free in the hands of investors.

    Five, no one with a taxable income of Rs 100,000 will be required to pay income tax as against the earlier Rs 50,000. Millions of assesses stand to benefit from this move, which is in line with the recommendations of the Kelkar Committee.

    Then of course a lot of the measures that were expected to be taken to increase tax collections (like removal of tax benefits offered under Section 88 etc) did not happen. This is a big 'notional' benefit for tax payers.

    From a retail perspective, this budget goes down well. Both for taking some concrete measures to protect the interest of the investor and, more so for not taking measures that were widely expected (and proposed by the Kelkar Committee).

    If you are in Mumbai and need help in planning your finances, give us a call. We are experienced and qualified and are in a position to meet your requirements. Not in Mumbai? Still want to benefit from our research on mutual funds? Subscribe to FundSelect! Click here to know more.

  • Get the budget special issue of Money Simplified, our free quarterly publication. Click here!

    Its about selecting the right stock... the right price!

    Equitymaster follows the value-investing approach to selecting stocks for investment. Subscribe to our premium research today!

    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

    Sep 17, 2020

    This leading household brand will profit big time in a post covid world.

    My Top Stock to Buy in this Market Selloff (Profit Hunter)

    Sep 22, 2020

    The recent correction offers a great opportunity to buy this high conviction smallcap stock.

    Can the Nifty Fall to 10,200? (Fast Profits Daily)

    Sep 24, 2020

    The Nifty has reached an important support level today. If it breaks then we could see further downside.

    What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

    Sep 18, 2020

    Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


    © Equitymaster Agora Research Private Limited |
    Why Personalfn? | Why Equitymaster? | Terms of Use | Contact Us | About Us