Union Budget 2021: What’s in it for Investors?

The Union Budget 2021 has given a big boost to the stock markets in India. The BSE Sensex has gone up by 2,314 points and the Nifty 50 by 646 points. India’s healthcare sector got a major shot in the arm as the government plans to spend Rs 64,180 crore on the Aatmanirbhar Swasth Bharat Yojana, a new centrally sponsored scheme, over the next six years.

The scheme would develop the primary, secondary, and tertiary healthcare sectors and focus on creating institutions to detect and cure new and emerging diseases. You would find the common man looking to buy an affordable home. The Finance Minister Mrs Nirmala Sitharaman has extended the tax holiday on affordable housing projects for one more year, providing a boost to the country’s affordable housing segment. Let’s look at what the Union Budget 2021 offers to investors. 

• Focus on affordable housing

The government retains its focus on the Pradhan Mantri Awas Yojana (PMAY) and the ‘Housing for all by 2022’ mission. You would find affordable housing dominating India’s real estate market with 50% of new real estate launches. 

You may avail a tax deduction under Section 80EEA of the Income Tax Act, on home loan interest for affordable housing. You can save an additional Rs 1.5 lakh per financial year on home loan interest, over and above the Rs 2 lakh, you already save under Section 24(b). 

You qualify for the tax deduction under Section 80EEA if you purchase a house where the house property’s stamp duty value is up to Rs 45 lakh. You get a tax deduction up to Rs 1.5 lakh per year on the interest you pay for the home loan sanctioned up to March 31, 2021. After Union Budget 2021, you may avail the Section 80EEA tax deduction on affordable housing projects up to March 31, 2022. You will be happy hearing this announcement if you are a first-time buyer of affordable residential property. 

• Boost for debt mutual funds

The Finance Minister Mrs Nirmala Sitharaman has proposed a permanent institutional framework to purchase investment-grade bonds which are stressed. It could enhance the liquidity of corporate bonds in the secondary market and boost India’s debt mutual fund sector. The mutual fund managers believe it is a positive move for credit risk funds and banking and PSU debt funds. 

Debt funds which put money in corporate bonds would benefit from this move. The new framework brings liquidity to the debt market. It boosts investors’ confidence, who have been affected by corporate bond investments in debt fund categories over the past years. 

You could expect a good return from credit risk funds, corporate bond funds and Banking and PSU funds after creating a permanent institutional framework to buy stressed investment-grade securities. 

• Boost for the insurance sector in India

Insurance is a capital-intensive business and badly needs funds to promote insurance penetration in India. The Finance Minister has proposed to enhance the FDI (Foreign Direct Investment) limit to 74% from the current 49% with relevant safeguards.

You would find the insurance sector in need of funds after the coronavirus pandemic. Many Indian partners of insurance companies could not infuse further capital into the business. The Finance Minister has solved this problem as foreign capital would flow into the Indian insurance sector. 

It would increase insurance penetration and build digital and infrastructure capabilities in the insurance sector after the coronavirus pandemic. 

• Launch of the LIC IPO

The Finance Minister has stated that India’s Life Insurance Corporation (LIC) would go for an IPO (Initial Public Offer) in FY 2021-22. It could be the largest share sale on the stock market. 

The government currently owns 100% of the stake in LIC. You would find the government conducting the LIC IPO in tranches. It may divest up to 25% stake in the Life Insurance Corporation of India. 

The Finance Minister Nirmala Sitharaman will notify SEBI (Securities and Exchange Board of India), the capital market regulator, as a regulator for gold exchanges. The Union Budget 2021 was a great one for investors in the stock market, with the absence of moves such as imposing wealth tax or increasing LTCG tax on equity. The Budget focused on economic growth at the cost of widening the fiscal deficit.

The equity investors were mighty pleased as there was no change in securities transaction tax (STT), capital gains tax or addition of a COVID tax. In a nutshell, the Union Budget 2021 focused on economic growth and the revival of key sectors after the Coronavirus pandemic. 

For any clarifications/feedback on the topic, please contact the writer at cleyon.dsouza@cleartax.in