Markets nervous ahead of Budget

New Delhi: The Union Budget to be presented on Wednesday is expected to increase exemptions on the personal income-tax leaving more money in the hands of the people hit by demonetisation.

However, finance minister Arun Jailtley may also chose to hike service tax by 1 per cent till July. This will give Mr Jaitley window of three months to raise additional revenue before GST comes in, but will push up the prices of most of the services including mobile calls, train and airfares, eating out at restaurants, insurance premiums, cost of under-construction flats and DTH bill among many others.

Stock markets are nervously waiting for the Budget to see whether the finance minister will introduce long-term capital gains tax on shares despite Mr Jaitley assuring against any such possibility.

Market participants have been jittery ever since Prime minister Narendra Modi, last month during a function in Maharashtra, had said that contribution of tax from those who make money on the markets has been low and “we should consider methods for increasing it in a fair, efficient and transparent way”. Currently, there is no long-term capital gains tax on sale of shares traded on stock markets, if held for more than one year.

Meanwhile, short-term capital gains (STCG), profits on sale of shares held for less than 12 months, are taxed at a flat rate of 15 per cent. All stock market transactions currently also attract securities transaction tax (STT) in a range between 0.017 per cent and 0.125 per cent. Earlier, the Modi government had increased the holding period for debt mutual funds from one year to three years to avail long-term capital gains benefit of zero tax.