Union Budget 2022 was one of the most important events before the State Elections of 2022. Fortunately, there were no populist measures or freebies for any class of citizens, however, there were a few things that went as per expectations and some did not. Maybe in the future, they will, who knows!
So, what went right?
- Virtual digital assets are to be taxed at 30% and no setoff is allowed on losses. Along with that, there will be a 1% TDS on payments made on digital assets transfer.
In short, from the cryptocurrency gains that one makes, he/she will have to give away 30% of it to the government. Moreover, if an individual is trading frequently, he/she is surely going to pay a lot more than 30%. This, in a way, will massively reduce the cryptocurrency mania. Cryptocurrency is not legal yet and was clarified by the Honorable FM Nirmala Sitharaman in the post-budget conference.
- Introduction of India’s own Central Bank Digital Currency
It will be too naive and early to comment a lot upon this topic because the devil lies in details and the details aren’t out yet. But this surely means there will be appropriate checks and balances, with appropriate monitoring by authorities, unlike what’s happening now. The benefits? Well, the costs of transacting, printing, and lending will reduce and lead to more financial inclusion.
- A whopping increase of 35% in Capital Expenditure
One thing that was implied from the finance minister’s speech was that it was a growth-oriented budget with a focus on spending and revival. Outlay reserved for roads, railways, electric vehicle equipment, and infrastructure projects was pretty high and this will fuel the private capital expenditure as well.
- Special focus on mental health
While not going into the nitty-gritty and debates on whether the health outlay took a hit due to less spending on vaccines for 2022-23, one of the key takeaways was - the soon-to-be-launched National Tele Mental Health Programme. Mental health has taken a severe hit post-Covid-19 and hence, this indeed was a welcome move.
- All-inclusive social welfare
The Jal Jeevan Mission which has been largely successful till now (evident from the results reported by many pipe stocks) got a booster dose as the department of drinking water and sanitation now targets installing the needed infrastructure in 3.8 crore households in 2022-23. Special mention of developing infrastructure of the North Eastern and Northern border belt areas also bodes well for all-inclusive growth of the Indian economy.
Finally, what went wrong?
Well, the government had its own hits and misses like every year and yes, there should’ve been some announcements that would have not cheered almost all the categories of citizens out there.
- LTCG & STT
It was ex-Finance Minister P Chidambaram who had played a smart move by introducing the Securities Transaction Tax in 2004. At the same time, the Long Term Capital Gains Tax was removed, and a long-term investor was never punished for making profits like he is now! STT and LTCG never coexisted, it was either of the two. However, in 2018, the then Late FM Arun Jaitley had reintroduced the LTCG without removing the STT.
Therefore, various sections of the society did expect either the reduction or removal of STT or LTCG. The removal of either of the two could have cheered the markets and not only the rich who invest in the market but also the middle class and the lower middle class who have now started investing heavily in equity-oriented instruments.
- Disinvestment, Divestment, & Privatization
It was 2019 when the government had made pretty big plans of privatizing Container Corporation (NS:CCRI) (CONCOR), Shipping Corporation (NS:SCI), BPCL, and Air India. 3 years since 2019, and the strike rate is only 25%.
The government continues to struggle to divest BPCL even after multiple attempts. Yes, LIC IPO will help the government come closer to its disinvestment targets, but in the circumstances, we are in (post covid world), the government should’ve targeted more and done better.
A government has to govern and let professionals run the business.
- Levying a heavy tax on the Rich/Ultra-Rich/HNIs
While there was no change in the direct tax slabs, here is one thing which shouldn’t have remained status quo.
Individuals falling under the 15 Lakh+ annual income slab pay a whopping 30% plus additional surcharges towards direct tax. Asking the ultra-rich to pay higher taxes than an individual with less income is justified, however, there should be a time limit up to which the HNI is asked to pay more than 40% of his income towards taxes.
With improving government finances and more opportunities for privatizing PSU companies, there should’ve been a relief to the rich who also fuel the Indian economy.
Disclaimer: Only for informational purposes