What do mutual fund investors expect from Budget 2020?

Capitalstars Investment Advisor

The budget 2020 is around the corner. Mutual fund houses are playing it safe this year - most refuse to comment on their expectations from the budget. Association of Mutual Funds of India or Amfi has already put out a wish list. ETMutualFunds.com wanted to know what are mutual fund investors expecting from the forthcoming budget and conducted a small Twitter poll to find out.

We offered four options, long-standing demands from fund houses, to investors to choose from:

*Removal of long-term capital gains (LTCG) tax on equity mutual funds

*Hike in Section 80C limit of Rs 1.5 lakh

*Cut in personal income tax

*Lastly, others (asking the investors to mention if they are expecting anything else from the budget)

The poll was active on our twitter handle @ETMutualFunds for a week. Around 655 readers participated in the poll. And the final results were very much in line with the wide expectations this year.

Around 44% poll participants voted for 'cut personal income tax,' followed by 32% votes for 'remove LTCG tax on equities'.

Currently, long-term capital gains made in equity mutual funds held for a period of one year or more are taxed at 10%. The tax is levied on gains of over Rs 1 lakh in a financial year. The finance minister re-introduced LTCG tax in 2018 budget.

Next, 21% users expect the government to hike Section 80C limit from the existing 1.5 lakh. Currently, investments in a few listed investments qualify for tax deductions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Mutual fund houses have been asking for an increase in the deduction limit and an exclusive deductions for ELSS funds within that.

Some investors had special demands and they offered them in their comments section of the poll. A few interesting and noteworthy comments were:

*'Provide some relief to middle class income groups so that they would be left with more disposable income in their hands. This can help to boost consumption and investment.'

*'Remove all direct taxes. Improve the collection of indirect taxes.'

The debate on what sops the finance minister is going to offer in the upcoming budget is raging on. 

Most mutual fund managers believe that no one knows what the budget has in store for us this year. They ask investors not to worry about the budget as it is an annual occurrence.

However, mutual fund managers believe that regardless of the budgetary allocations and allowances, investors should continue to invest for their goals via a systematic investment plan as per their risk profile and time horizon.

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