Big hopes of small investors

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Big hopes of small investors

Wednesday, 27 January 2021 | Hima Bindu Kota

Big hopes of  small investors

The pandemic has left people in a state of uncertainty. Hopes are now glued to the forthcoming Union Budget 

The COVID-19 pandemic left small investors in a state of uncertainty as there were major job and business losses, salary cuts and, above all, loss of lives and health. Although the steady rise of the stock markets this month gave some respite and hope to people, 2020 was mostly a tough year and hopes are now pinned on the forthcoming Union Budget on February 1. After an insipid annual financial statement last year, the nation is now looking to Finance Minister Nirmala Sitharaman to spread some cheer.

For common people, Income-Tax (I-T) relief is an important aspect. Although relief in I-T slabs would be a welcome move, it is highly unlikely this time as the Government is stretched to the limit due to the expenses it has incurred in fighting the virus and also due to the vaccination drive. It would be a great respite for small investors if the overall deductions under Section 80C could be increased from the current levels of Rs 1.5 lakh to somewhere between Rs 2.5-Rs 3 lakh. Senior citizens have been the worst affected by the contagion and to give some respite to senior citizens, tax relief could be increased from the current Rs 3-Rs 5 lakh to merge with the I-T exemption limit of super senior citizens.

Further, the interest accrued on the Senior Citizens Savings Scheme (SCSS) is taxable. A full rebate on this interest could turn out to be a boon for the elderly.  The possibility of increasing the exemption limit under Section 80TTB, that is, the interest on income from various deposits of senior citizens like savings bank accounts, fixed deposits and recurring deposit accounts, should be addressed, with limits increasing from the current levels of Rs 50,000 to at least Rs 1,00,000.

A lot of people, who lost their jobs during the last year, were from the lower income category, particularly women. The Government had extended the moratorium period for companies for filing Goods and Services Tax (GST) returns. If this facility could be extended to non-living entities like companies, similar measures should be extended to people, particularly women in the low income category. The I-T exemption limit can be increased marginally for women from Rs 2.5 lakh to Rs 3 lakh. Also, for women who fall in the income category of Rs 3-Rs 10 lakh, a moratorium period can be extended till they find stability in their jobs, to pay taxes.

 Newer saving schemes and bonds with unique features are also the need of the hour. Although the stock markets gave  strong returns last year, not all micro investors can understand equity markets. Therefore, there is a need to deepen the debt markets in India to channelise long-term savings of micro investors in the bond market. There is a need to develop the Debt-Linked Savings Scheme (DLSS) similar to the Equity-Linked Savings Scheme (ELSS). DLSS can in turn invest in debt instruments permissible under SEBI regulations. This Budget should also provide I-T deductions for investments in DLSS up to a limit of Rs 1.5 lakh. This would encourage small investors, who are wary of equity markets, to participate in debt markets and take advantage of tax exemptions. The ELSS was introduced in 1992 to encourage equity investments in India. Similar efforts to boost debt markets will go a long way in deepening the bond markets in India. Infrastructure bonds should also be the flavour of this Budget to provide additional tax breaks to small investors. The introduction of newer saving schemes and bonds will have the twin advantages of providing small investors an avenue for saving while mobilising funds for the Government to direct into several development projects.

 (The writer is Associate Professor, Amity University, Noida. The views expressed are personal.)

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