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Will govt rollback LTCG tax on equity mutual funds in budget 2019?

The interim finance minister is scheduled to present the budget at 11 pm today.

ET Online|
Updated: Feb 01, 2019, 09.26 AM IST
interim budget
Mutual fund industry is hopeful that the government may rollback long term capital gains tax on equity mutual funds in the budget. The interim finance minister is scheduled to present the budget at 11 pm today.

The finance minister Arun Jaitley re-introduced LTCG tax on equity in his last budget. He taxed long term capital gains of over Rs 1 lakh in a financial year at a flat rate of 10 per cent. Mutual fund players say there are chances the government might rollback LTCG tax as the tax collection was not 'significant'.

“There is a view that the government may rollback LTCG tax since the amount collected is not significant,” says a senior official at a private sector mutual fund.

“In view of grandfathering, this change in capital gain tax will bring marginal revenue gain of about Rs 20,000 crores in the first year. The revenues in subsequent years may be more,” the finance minister had said in his budget speech.

However, unlike the previous budgets, mutual fund industry is not expecting any big sops from the government. “It is not clear whether the government would make any big announcement since it is going to be an interim budget. Anyway, we are not expecting any major announcement for the mutual fund industry this time,” said the mutual fund official.

However, many mutual fund players believe that the industry might indirectly benefit from a likely basic tax exemption limit in the budget. The basic tax exemption limit is currently Rs 2.5 lakh. Industry participants believe that the government may offer some tax concessions in the form of hiking basic exemption limit or enhancement of tax slabs to woo the middle-class voters in its last budget.

Will the government enhance the 80C limit? The mutual fund industry players are not expecting anything on that front. “We had hopes of a large deduction limit under Section 80C from the last two budgets. We also hoped that the government may permit us to introduce a debt mutual fund scheme under Section 80C, but we are not expecting anything from this interim budget,” says a senior mutual fund manager.

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