Majority of experts are not anticipating an increase in capital gains tax in the Budget for 2025.
Capital Gains Tax: With the Union Budget of 2025 just around the corner, many market experts predict that Finance Minister Nirmala Sitharaman will not surprise the public this year with a sudden increase in capital gains tax, unlike last year.
Experts suggest that the government may consider implementing some tax measures to stimulate consumption during a period of slowed growth. However, the budget’s impact on reviving growth or earnings is expected to be limited.
These insights were gathered from the latest Moneycontrol Market Poll, which involved nearly 45 participants from various sectors such as broking firms, mutual funds, AIFs, PMS, and independent experts.
An overwhelming 91 percent of respondents do not anticipate any capital gains tax hikes in the upcoming budget. Interestingly, following last year’s unexpected announcement, the remaining nine percent believe there is a possibility of a hike. None of the respondents selected the “no” option.
Last year’s increase in capital gains tax made headlines and significantly impacted the markets due to the surprise announcement. The short-term capital gains tax on equity holdings held for less than one year was raised from 15 percent to 20 percent, while the long-term capital gains tax on holdings sold after one year increased from 10 percent to 12.5 percent.
Regarding the potential impact of the Budget on corporate earnings, 44 percent of respondents believe that measures to revive earnings may be announced, but they may not be sufficient to achieve a 15 percent growth in the earnings of Nifty companies.
Twenty-one percent of the respondents clearly stated that the Budget would not be able to address the earnings slowdown, while 19 percent believed it could. The remaining 16 percent of respondents indicated that the revival of earnings would be dependent on external factors.
Brokerages are forecasting continued slow growth for companies in the December quarter, with only a few sectors expected to show strong earnings. Top-line growth for listed firms is expected to remain subdued for the seventh consecutive quarter, with year-on-year margins facing pressure leading to the third consecutive quarter of profit growth below 10%.
Regarding capex growth, 51 percent of respondents anticipate it to be in the range of 8-12 percent in this year’s Budget, while 35 percent expect it to be between 5-8 percent. The remaining 14 percent expect it to fall within the range of 12-15 percent.
Given the current subdued economic growth, with India’s growth projected to decline to 6.4 percent in FY25, its lowest level in four years, market experts anticipate tax measures in the Budget to stimulate consumption. However, 68 percent of respondents believe that any tax-related announcements to boost consumption will not have a significant impact.
Only 23 percent of respondents expect tax-related announcements to boost consumption, while nine percent do not anticipate any such announcements in the Budget. Market experts suggest that the finance minister may prioritize maintaining public spending with capex growth of 10% or higher, followed by introducing new reform-oriented ideas with significant intent.
Experts believe that other priority areas on the Finance Minister’s radar include implementing new incentive schemes to boost private investments, focusing on fiscal consolidation to achieve a 4.5% target in FY26, and stimulating consumption through tax breaks.
Furthermore, when asked to identify the core sectors that could receive the most government spending, respondents ranked metros, railways, defense, and roads in that order.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.