3 Major Misses in the Union Budget 2019 for Retail Investors

The Budget 2019 was presented by the Finance Minister Nirmala Sitharaman in Parliament earlier this month. While the government introduced various reforms in the NBFC, agriculture and infrastructure sectors, not many amendments were proposed to benefit the retail investors. Here are the three major focal points that were overlooked in the Budget.

Long-Term Capital Gains (LTCG) Tax on Equity Mutual Funds

One of the most anticipated reforms among investors was the revision of tax implications on equity-based mutual funds. The equity mutual funds belong to the same asset class as that of the ULIP.

However, investors believe that it is unfair to have two different tax norms applicable to them. While the ULIP is tax-free, equity mutual funds attract a long-term capital gains tax on the returns generated. Failure to address the issue can result in ULIP’s being mis-sold in the future.

Also Read: Union Budget 2019 Aims at Boosting the ‘Make in India’ Initiative

Goods and Services Tax (GST) on Insurances

Another critical aspect that was overlooked in the Budget was the implication of GST on health and term insurances. At present, individuals who wish to invest in pure risk insurances are required to pay a GST of 18% – the same as that of alcohol. However, the government has failed to oversee the issue. An amendment concerning the GST implications on pure risk insurance would have benefited consumers greatly.

Deductions under Section 80C

The last time the Section 80C limit under IT Act, 1961, was increased was in the year 2014-15. Taxpayers with relatively higher incomes and ongoing housing loans have often found themselves in a dilemma considering the Rs 1.50 lakh 80C limit.

Though investors had urged the Centre to address the issue and increase the 80C limit from Rs 1.50 lakh to Rs 2.50 – Rs. 3 lakh, the Budget failed to mention any amendments concerning the 80C limit.

An increase in the 80C limit would allow individuals to bring down the tax burden and improve the capital markets at the same time.