The interim budget 2019 included few indicators properly placed in the budget speech, if identified and analyzed properly, could become a great opportunity for smart investors to create tremendous wealth in long term. This blog tries to explain and analyze the same.
1.Vision 2030 and Economic Growth
For the long term investors in India, it was an EXCEPTIONAL budget as for the first time ever, it has done something unusual. Generally, budget includes plan only for next 1 year and this, being an interim budget, its utility is even shorter – just 2 months. However, this budget is so courageous that it charts out an 11-year plan with Vision 2030.
In addition to a 10 point 2030 vision, India aspires to be a 10 trillion dollar economy in just 13 years. The Indian economy is about $2.8 trillion and growing to $10 trillion in 13 years translate into growing 3.5 times in 13 years, i.e. growing more than 10% p.a. for 13 years.
2.Trusting of Citizens
The government appears to trust its own citizens and it can be seen as 99.54% income tax returns were accepted as filed (no addition of income or asking of information). Only 0.46% returns were processed with department interaction. Also, the government has taken steps to reduce the processing of return from 6-8 weeks to just 1-2 days in 18 months and within 2 years, 100% of tax returns will be processed remotely without any physical interaction.
3. Rewarding Honesty
For the first time, honest tax payers like us have heard “Thank You” from the finance minister. Rewarding honest citizens is clearly evident in Demonetization, Jan dhan, Aadhaar linking, Direct benefit transfer, GST, and now with the changes proposed in the budget. For instance, the budget proposes additional 3% interest subsidy to honest farmers for timely repayment of loan instead of waiting for election year for loan waiver.
4. Addressing Fears
The Government has worked hard to address the fears of common persons with schemes like Jan Dhan, Awas Yojana, Suraksha Bima Yojana, Jeevan Jyoti Boma Yojana, Atal Pension Yojna, Vay Vandana Yojana. The budget also increases limit for gratuity, ESI, EPF as well as introduces bonus and pension for low income citizens with Shram Yogi Maandhan Yojana. All these would provide mental security to citizens for emergencies like life, medical and retirement expenses.
5. Savings and Prosperity
The game changer proposal is no tax for persons having taxable income of less than 5 lakhs. There are more than 3 crore tax payers whose taxable income is less than 5 lakhs. If planned perfectly taking benefits of deductions, exemptions and credits, a family of 4 can easily have income of 30-40 lakhs per year EVERY year and pay 0 tax. LEGALLY. This is a masterstroke that would increase the official savings of Indians and will ultimately lead to prosperity.
All the above 5 factors could result in the increase of number of individual tax return filers and/or reporting of higher income as it would not result in additional tax. Assuming 3 crore tax payers increase reporting of 2 lakhs income per year, it would mean 6 lakh crores of official income / money in bank EVERY YEAR.
All these official income would EITHER increase official spending – driving consumption OR increase investments in financial assets rather than real estate and gold. And ultimately, with the multiplier effect of official money, it would drive economy and create an amazing experience for long term investors.
In short, Future is very exciting for smart investors who spot and utilize this opportunity to create wealth. While there would be bumps along the way, tax planning as well as planning for investments with an eye for identifying and analyzing opportunity holds the key for tremendous wealth creation.
Please share your comments below. Thank you.