Budget 2020: Could tax reliefs be in the offing? Here's what the market is saying

Days before what may be a critical budget and at a time when the country is nationwide protests against the Citizenship Amendment Act (CAA) and National Register of Citizens (NRC), there are heavy expectations from the finance ministry this year. Amid the chaos in the country and ahead of the budget on February 1, market analysts are buzzing with expectation over three key tex reforms. 

The 2020 Budget, which will be presented by Finance Minister Nirmala Sitharaman, is being pegged as one that will have to serve dual purposes of driving industry investment, and also increasing consumption.

The three key expectations of the markets are:

Long-Term Capital Gains Tax (LTCG)

After a gap of 14 years, the Long-Term Capital Gains Tax (LTCG) was re-introduced by late Finance Minister Arun Jaitely in his budget during 2018-19. According to market analysts, the government should either scrap the LTCG or extend the period for investments for over two years to boost the economy. Capital gain is any profit that is received through the sale of a capital asset. There are two types of capital gains tax- short term and long term. 

Read: Centre's advance estimate peg 2019-20 GDP growth at 5%, down from 6.8%; Mfg at 2%

Dividend Distribution Tax

According to reports, market experts are expecting changes in the Dividend Distribution Tax (DDT). According to them, the tax can be scrapped to stop the multiplicity of taxes for the companies, but it will be taxable for the receiver for the benefit. 

A dividend is a return that is given by the company out of the total profits that it earns in a year. The DDT is levied on dividends that are distributed by the companies who are making a profit. It is considered as an additional tax that is levied on the company which is already paying a tax. Currently, along with income tax, Indian companies are paying a 20 to 21 per cent DDT.

Read: Mamata Banerjee claims 12.68% GDP growth in West Bengal, slams Centre days before Budget

Personal tax relief

Amid the economic slowdown, the market experts are expecting a cut in the personal income tax in order to boost the economy and spur the consumption. However, some experts argue that reducing the personal income tax will hit the exchequer. Tax relief is an incentive that lowers the tax which is owed by an individual or, as was the case with the recent corporate tax cut, a company. 

Read: CJI Bobde's subtle hint ahead of budget, says 'Excessive tax results in social injustice'

Centre's GDP estimate for 2019-20  

According to the first advance estimates released by the Centre on January 7, India's real GDP (Gross Domestic Product) growth during the financial year 2019-2020 is expected at 5% as compared to last year's 6.8%. This estimate is in line with the Reserve Bank of India's (RBI) own revised estimate in December. The economy grew by 4.5%, the lowest in six years, in the second quarter (July-September) of this fiscal in weakening from the previous quarter's 4.8 per cent.

Read: Union Budget 2020: Tourism industry in Dharamshala share expectations