Do it yourself

Capital expenditure (capex) has been one of the primary focus areas of the government in the past one decade. As per the Economic Survey 2024, “The focus of capex has been broad-based. Spending in sectors such as road transport and highways, railways, defense services, and telecommunications delivers higher and longer impetuses to growth by addressing logistical bottlenecks and expanding productive capacities. Government capex has also begun to crowd in private investment, as discussed earlier in this chapter. Additionally, the Government continues to disburse grants-in-aid for the creation of capital assets to the states, thereby incentivizing them to increase their productive spending.” Accordingly, “capex” has emerged as an important driver of growth, as indicated in its rising share of nominal GDP. As per the provisional actual (PA) figures for the FY24, capex for FY24 stood at ₹ 9.5 lakh crore, an increa...

The union budget for the fiscal year 2024-2025 has been read, analyzed, criticized, and apparently brushed aside by the markets. Changes in the taxation of capital gains; changes in the custom duty and capital gain tax structure for gold; and higher rate of STT on derivative transactions are three points that have attracted the maximum attention, especially from the market participants. I had posted my first impression of the Union Budget FY25 on Tuesday. On a second reading of the budget documents and listening to the views of a variety of experts, I have gathered some more inputs that I would like to share with the readers. Impact of capital gain tax changes on equity markets The long-term capital gain tax (LTCG) on sale of listed shares has been increased from 10% to 12.5% and the short-term capital gain tax (STCG) has been increased from 15% to 20%. The market reacted negatively to the announcement initially. However, all the losses were recouped within an hour. This has sur...

 The final budget presented by the finance minister has shaken the market cart, and added material uncertainty to policy making. The efforts to minimize uncertainty after demonetization have thus been negated to some extent. As has been the practice in the past few years, the budget speech of the finance minister materially diverges from the actual budgetary provisions. By changing the capital gain tax regime and mentioning that they are working on a new Income tax law, they have forced the stakeholders to build-in a higher degree of policy uncertainty and unmindful regulatory provisions in their business and investment plans. Claiming simplification while introducing new complications (e.g., more transactions under TDS/TCS) has been a hallmark of the taxation policy in recent years. Use of technology is invariably claimed as an achievement, as if there is an option. The level of uncertainty could be gauged from the fact that the priorities outlined in this budget are materially ...