Union Budget 2024 | Expect uniformity in tax treatment, extending benefit of ELSS: BDO India MF expert

Uniformity in tax treatment and extending benefit of ELSS are the two things Manoj Purohit, Partner & Leader, Financial Services Tax, Tax & Regulatory Services at BDO LLP India said he expected.

Finance Minister Nirmala Sitharaman will present the Union Budget on July 23. News has emerged that Prime Minister Narendra Modi might have a more troubled Budget this time, to accommodate the wishes of his alliance partners JD(U) chief Nitish Kumar and TDP supremo Chandrababu Naidu. However, it is more likely that the Budget will be a feel-good one, coming on the back of the Rs 2.11 lakh crore record dividend to the union government from the RBI.

With the Budget mere days away, Manoj Purohit, Partner & Leader, Financial Services Tax, Tax & Regulatory Services at BDO LLP India, aired his expectations:

1. Uniformity in tax treatment

Currently, the tax rates vary for short-term and long-term assets, depending on the type of capital asset and payment of applicable securities transaction tax. For listed shares, a holding period of 12 months qualifies as long-term, whereas for unlisted shares, it extends to 24 months. Similarly, listed debentures require a 12-month holding period for long-term status, compared to 36 months for unlisted debentures Equity-oriented mutual fund units achieve long-term status after 12 months, while it is 36 months for debt-oriented mutual fund units. Tax rates on capital gains range from 10 per cent-30 per cent, depending upon the nature of financial asset and holding period. To simplify tax regulations and ensure equity across equity and debt segments, it is expected that the law will be amended to consider all the types of financial assets as long-term capital assets after 12 months of holding. Additionally, a single tax rate for long-term and short-term capital gains should be introduced, regardless of whether the investment is equity or debt; listed or unlisted.

2. Extension of benefit of Equity Linked Savings Scheme

Equity Linked Savings Scheme (ELSS) was introduced to encourage retail investments in equity instruments. By providing a deduction of INR 1.5 lakhs on investments in ELSS, the investors avail the dual benefit of tax benefit and long-term capital growth. Given the growing interest in the debt market and to channelise household savings into debt and bond markets, it is an opportune time to introduce Debt Linked Savings Scheme (DLSS). Similar to ELSS, investors should receive a deduction of up to INR 1.5 Lakhs in DLSS. This initiative will bring debt-oriented mutual funds at par with tax-saving instruments such as ELSS and tax-saving bank fixed deposits, eligible under section 80C. The introduction of DLSS with tax benefits will provide retail investors with an alternative avenue to participate in the bond market, offering lower costs and reduced risks compared to equity markets.

Union Budget 2024 | Making a record for any Finance Minister, Nirmala Sitharaman will be presenting her 7th Union Budget on July 23, 2024 under the Modi 3.0 government. While inflation has burnt a hole in the pockets of 'aam janata', will this Budget spell relief for Indians? Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.