Mutual Fund industry is optimistic that the government may go back foot about the long term capital gains tax on equity mutual funds in the budget. The provisional finance minister has scheduled to present the budget at 11 p.m today.
Arun Jaitley the finance minister has reintroduced LTCG tax on equity in his last budget. Long Term Capital Gains of over 1lakh in a financial year will be taxable of flat 10% rate. As per the mutual fund players, the government may roll back the LTCG Tax as the tax collection was not “significant”!
A senior official at a private sector mutual fund said, “There is a view that the government may rollback LTCG tax since the amount collected is not significant”.
The finance minister Arun Jaitley said in his budget speech that “In view of grandfathering, this change in capital gain tax will bring marginal revenue gain of about Rs. 20,000 crores in the first year. The revenues in subsequent years may be more”.
Mutual Fund industry is not expecting any of the big sops from the government for the previous budgets. The mutual fund official said “It is not clear whether the government would make any big announcement since it is going to be an interim budget. Anyway, we are not expecting any major announcement for the mutual fund industry this time”.
Some mutual fund players think that maybe industry might get an indirect benefit from a likely basic tax exemption limit in the budget. Rs.2.5 Lakh is currently the basic tax exemption. Participants of the industry believe that Government may offer some tax concessions in the form of hiking basic exemption limit or enhancement of tax slabs to woo the middle-class voters in its last budget.
So, What will be the 80C limit? Will the government enhance it? Mutual Fund industry is not expecting anything from that. “we had hopes of a large deduction limit under section 80C from the last two budgets. We also hoped that the government may permit us to introduce a debt mutual fund scheme under 80C, but we are not expecting anything from this interim budget,” says a senior mutual fund manager.