Pros and Cons of Budget 2024: How Will It Affect Your Investments?
In terms of the pros and cons of the budget, the best thing is that it has given a boost to the rural economy and agriculture sector. However, the biggest drawback is that the budget has increased the taxes on long-term and short-term capital gains.
Finance Minister, Ms. Nirmala Sitharaman, has made many announcements to give a boost to employment in the manufacturing sector. Moreover, the budget has increased the standard deduction limit from Rs. 50,000 to Rs. 75,000 for salaried individuals, which will reduce their tax burden.
However, Ms. Sitharaman has made a few announcements which are not in the favour of investors. For example, she has increased the tax applicable on long-term capital gains (LTCG) from financial and non-financial assets from 10% currently to 12.5%. On certain financial assets, the budget has also increased the short-term capital gains (STCG) tax from 15% to 20%.
From now on, when you earn LTCG and STCG from investments, chances are high that you will be paying a higher tax. This is certainly a negative announcement.
The announcements related to agriculture, employment in agriculture, and the standard deduction hike will help increase the consumption of people in rural and urban areas. Therefore, sectors depending upon consumption like consumer durables and FMCG will gain. Meanwhile, the government continues to focus on infrastructure, which is good for stocks in the infrastructure sector.
However, an increase in LTCG and STCG will increase the tax burden of investors in the Indian stock market. At Bajaj Broking, we believe that BudgetSimpleHai. Therefore, we bring you the pros and cons of the budget and post budget investment effects in this blog. So, if you are an equity investor or are going to open a demat account, read on…
Positive Impacts of Budget 2024 on Investments
For investors, the following announcements are likely to result in the most positive post budget investment effects.
- On agriculture, the budget has given a boost to climate-resilient varieties of crops. Such a move is positive because it will help farmers deal with inflation better.
- An outlay of Rs. 1.52 lakh crores for the agriculture sector is positive because it will improve the income of rural households.
- On infrastructure, the announcement to develop the Gaya node along the Amritsar-Kolkata route will provide an economic boost to the Eastern Dedicated Freight Corridor.
- Schemes for job creation in the manufacturing sector by providing cash benefits to employers and employees will increase employment for poor and low-middle-class people in rural and urban areas.
- Ms. Sitharaman has announced that the government will provide one month's wage to all people newly entering the workplace. The government will transfer one month's salary of such persons in 3 instalments. A benefit of Rs. 15,000 is announced for each person like this.
- For salaried individuals, the budget has increased the standard deduction from Rs. 50,000 to Rs. 75,000, thereby reducing their tax burden.
- Under the new tax regime, the government has changed the tax rates. Due to these changes, a salaried person can save up to Rs. 17,500 in income tax.
Potential Drawbacks of Budget 2024 on Investments
As the budget has increased short-term capital gains (STCG) tax and long-term capital gains (LTCG) tax, this is the most negative post budget investment effect.
- The budget has hiked the tax on LTCG from financial and non-financial assets from 10% as of now to 12.5%.
- On certain financial assets, the government has increased the tax on STCG from 15% currently to 20%.
Sector-wise Analysis
- ; Ms. Sitharaman has provided a relief for taxpayers by reducing their tax burden. This will give a boost to consumption. With lesser taxes, people will have more money to spend. So, they will be able to spend more on consumer goods and FMCG. Stocks to watch out for include Hindustan Unilever, Titan Company, Marico, and Nestle India.
- Infrastructure: The government has announced a capital expenditure of Rs 11.1 lakh crores for FY 2024-25. The government’s commitment towards capex is a big plus for infrastructure stocks. Stocks to watch out for include Larsen & Toubro (L&T), KNR Constructions, Container Corporation of India, and Titagarh Wagons.
- Housing finance: The budget has shown the government’s commitment towards affordable housing. The Finance Minister announced 3 crores additional houses in rural and urban areas under Pradhan Mantri Awas Yojana (PMAY). This is a positive move for all banks like State Bank of India, ICICI Bank, Punjab National Bank, etc. which provide housing loans.
Conclusion
If you are an equity investor, you’d be mostly satisfied with the budget, especially if you are a middle-class salaried individuals. Overall, the announcements were as per budget expectations mostly. Budget announcements pertaining to tax-reliefs will help you save more. Consequently, your savings, spending, and investment will get a boost. However, you may have to pay more tax on your STCG and LTCG from now on. So, be careful and analyse the pros and cons of the budget wisely.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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