Interim Budget 2024: Sector-wise wishlist, stock market tax sops, divestments & more

As the interim Budget draws closer, there has been build up of high expectations across sectors. Analysts said the market would prefer fiscal prudence, though some populist measures in the wake of upcoming Lok Sabha elections cannot be ruled out.

Prabhudas Lilladher (PL) believes the FM will focus on giving a balanced approach to being growth-oriented and pragmatic with a focus on rural development and social schemes, with allocation for credit availability, MNREGA, PM Awas and Food security etc. It expects some tax sops for middle class, renewed thrust on infrastructure development, in addition to concrete steps on energy transition and higher education etc.

Sunil Nyati, Managing Director of Swastika Investmart said the government's primary emphasis could be on fostering economic growth through increased capital investment and infrastructure development. "It seems likely that sectors such as manufacturing and renewable energy will receive additional stimulus. In the lead-up to the upcoming general election, we can anticipate announcements tailored to benefit salary classes and rural populations," he said.

Sector-wise wishlist

For the automobile sector, PL sees continued allocation of funds in existing areas like scrappage policy, PLI schemes, introduce the next phase of FAME subsidies and continued investment in infrastructure projects. Incentivising R&D in the EV space is likely it said.

It sees increased allocation towards fueling growth in manufacturing sectors, which would boost prospects for logistics players. For real estate, it sees increase home loan interest rate rebate from Rs 2 lakh  to Rs 5 lakh and modifying affordable housing limit to Rs 1 crore from current level of Rs 45 lakh.

PL anticipates PLI 2 scheme for metals sector. It expects safeguard duties or reinstating old anti-dumping measures for domestic steel and stainless steel players to counter cheap imports from China/ Indonesia.

For defence sector, one can anticipate 5-7 per cent in capital outlay. Further increase of indigenous components, focus on emerging defence technologies like drones, UAVs and electronic warfare systems can also be on the FM's radar, PL said.

Railways, it says, can see the decent increase in capex and more Vande Bharat trains. In the power transmission and distribution sector, it sees capex announcement towards HVDC corridors and enhancing electrical equipment manufacturing ecosystem amid surge in power demand.

Fiscal deficit target

Nomura India expects the government to announce, in its interim budget on 1 February, that the fiscal deficit target of 5.9 per cent of GDP for FY24 is on track to be met. It expects the FY25 fiscal deficit at 5.4 per cent of GDP but expects the government to set a more ambitious target.

FY25 divestment target

ICRA expects the disinvestment target to be pegged at sub-Rs 50,000 crore  for FY2025, given the uncertainties involved in market transactions. It said would be prudent to set a moderate target, instead of a higher aim that may disrupt the budget math if there is a large shortfall in such receipts by the end of the fiscal, based on the past year trends.

According to DIPAM data, the total receipts from disinvestment stood at Rs 10,050 crore as on January 11. This includes sales of stake in Coal India, Rail Vikas Nigam Ltd, SJVN Ltd, Housing and Urban Development Corporation Ltd, IRCON International, HAL and IPO of Indian Renewables Energy Development Agency.

Equity, other tax sops

Rahul Charkha, Partner, Economic Laws Practice said the taxability of capital gains on equity shares is widely disseminated. The rates of tax for STT paid on listed shares and non-STT paid listed shares is different.

"Likewise, there is a disparity in the capital gains tax treatment on transfer of unlisted equity shares by resident and non-resident assessees. Add to this, is the incongruity in the valuation requirements under income-tax laws and other laws. There has been a long-standing demand to align the capital gains tax treatment on transfer of equity shares. Such alignment will not only simplify the taxability but also provide clarity," Charkha said.

The simplification of corporate tax rates has been well received by the corporates, he said adding that investors at large look forward to a similar universalisation of capital gains tax on transfer of equity shares.

"Securities transaction tax was introduced when tax on capital gains booked on sale of stocks was abolished. Now capital gains are taxed, hence STT needs to be abolished. This should reduce costs associated with trading and further deepen our markets. Otherwise, the finance minister should offer increased respite on capital gains taxation. For example, as per extant rules long term capital gains on stocks in excess of Rs 1 lakh are taxed at 10 per cent. This limit should be enhanced to Rs 3 lakh," said Shrey Jain, Founder and CEO SAS Online.

Jain said the government may also consider enhancing the limit under section 80c of IT Act. Instead of Rs 1.5 lakh, it should be made Rs 5 lakh. There should be a dedicated limit for investments in ELSS within section 80c, Jain said.

Sharad Chandra Shukla, Director at Mehta Equities said the income tax structure has remained more or less the same, but the number of tax return filed has gone up significantly.

"By exempting the lower income group from income tax will reduce the work for the govt. machinery and in turn they can focus on greater compliance in the higher income group. Expecting income tax cuts looks difficult due to the fiscal constraints. Enhancements of limits under Section 80C and 80D is possible due to adjustment for inflation rate. Government also indicate steps being proposed to take the glide path towards 4 per cent fiscal deficit to GDP ratio," Shukla said.  Shukla feels the Budget could be a non-event from the equity market point of view.

Also read: Budget 2024: Goldman Sachs says Centre may peg fiscal deficit for FY25 at 5.3%