Union Budget 2019—Is ITA Healthy Budget For Mutual Funds?

Portfolio : A collection of investments owned by the same individual or organization.

Will : legal declaration of how a person wish his/her possession to be disposed after their death

Investor : An investor is any party that makes an investment.

It is Total Assets of a person at the given point of time. That is buildings, investments and other assets s/he is having. Benefits will be enjoyed by his heirs after his death through his will.

A set of assets which an investor holds. This may contain equities, mutual funds, insurance and other cash equivalents.

Liquidity or marketability is the ability to convert an asset in to cash quickly.

The Union Budget 2019 is out and there are proposals that caught the attention of Mutual Funds and investors.

There are prospects of improved benefits for Mutual Funds, Investors and India Stock Exchange in general. Here are the ways how this Budget 2019-20 can benefit the Investors.

KYC Made Easy for Investors
80C Benefits for CPSE ETF Investments
For NRIs: NRI Investments And FPI Merger
Open Doors for FPIs in Infrastructure Investments
Ease of Domestic and Foreign Private Investments

1. KYC Made Easy For Investors

For investors, especially the first time investors, KYC verification is one major hassle.

Up until this announcement, PAN was mandatory to carry out the KYC process. With this Budget, the NDA Government has proposed to reduce this trouble by the use of Aadhar card.

Given the fact the Aadhar has far more reach to the citizens of India than PAN; it will surely encourage more people to become investors. This arrangement is not only for investors but Aadhar can be used instead of PAN in all other requirements.

Hence, for the KYC process to become a retail investor, you can provide your Aadhar card instead of PAN.

2. 80C Benefits for CPSE ETF Investments

Central Public Sector Enterprises (CPSE) ETFs are added to the list of instruments that gets tax benefit under section 80C of Income Tax Act, 1961.

The Equity Linked Savings Schemes (ELSS) is Tax Saving Mutual Funds that gives tax benefits under section 80C. In the Union Budget 2019, the Government has included the CPSE ETFs on along with the ELSS to receive the tax benefits.

Even though the focus of the Union Government is disinvestment from the CPSEs (Central Public Sector Enterprises), it turns out to be an excellent opportunity to save tax and get long term benefits as well. Hence, this must be considered a Win-Win situation by both the Union Government and the investors.

3. For NRIs: NRI Investments And FPI Merger

The merging of the NRI investments with Foreign Portfolio is one less hurdle for the NRIs to invest in the Indian securities.

Instead of investing directly, NRIs can invest in the Indian market through their foreign portfolio. Because of this, NRI investors will be able to invest in Mutual Funds, AIFs and other pooled investment funds with a lot of ease.

This move will bring in more resources to the Indian securities including equities since the Union Government have also proposed to increase the limits on FPIs.

4. Open Doors for FPIs in Infrastructure Investments

In the Union Budget 2019, the Government has also proposed to improve investments in Indian Infrastructure.

To carry out this plan, FPIs will be permitted to invest in Real Estate Investment Trusts (ReITs) and Infrastructure Investment Trusts (InvITs) through debt securities. The Foreign Portfolio Investors will serve as a vital capital resource for the infrastructure industry and improve market liquidity.

5. Ease of Domestic and Foreign Private Investments

The Union Budget 2019 has also shown the interest of Government to bring in more investments towards national development.

To achieve this, the Union Government has proposed measures to increase the domestic and foreign investments in Indian stock exchange. Some of the focus Public Sectors Units include IT sector, Banking, Real Estate, Manufacturing, etc.

The more open the market is an increased number of investors will come in—in turn, more capital. Even though it does not directly influence the Mutual Funds, it will keep the Indian stock market healthy and reduce risk probabilities.

Foreign Private investments will be crucial in providing the market with multiple points of support to keep the stock market stable. It also will improve market liquidity and the overall growth of the economy.

Final Words to Note

The investors’ perspective is that this Union Budget 2019 is about bringing in more capital to the Indian market.

It is evident from the fact that the stock market is more open to both domestic as well as foreign investors. Increase in participant investors and their diversity, hopefully, will ensure the growth of the Indian economy and the Investors as a whole.

What are your views on this year’s Union Budget? As an investor, could this be a game changer? Let us know.