Budget 2024: The worst pre-budget recommendations so far

Let’s start with the one pushed the most: The recommendation to lower capital gains tax.

Yeah, right. A government that is focussed on spending and plans to spend even more is going to start cutting capital gains taxes for the privileged few (if you make capital gains, you are among the privileged). How does this even make sense?

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To be totally transparent, I, too, have a similar recommendation out there, but with a twist. I proposed adding two more categories of capital gains: Ultra-long-term and ultra-short-term. The first should be made more attractive, and the second should be penalised more. So, it’s most likely revenue-positive from a government perspective, given that trading far exceeds long-term investing. Either way, incentives to invest for the very long term could, and should, in the long run, generate employment in the country by encouraging more risk capital flows. And, of course, it discourages trading. So, it kind of fits into India’s plans.

The other recommendation that I read often, and which I find hilarious, is the idea of reducing the STT (Securities Transaction Tax).

So, a conservative government, which has been trying to talk down unbridled trading in the stock markets, is suddenly going to read a recommendation to cut STT to encourage trading and act on it? Like, how does one even think through a scenario where the government is going to take a 180-degree turn because of some recommendation?

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Anyway, that takes me to the third popular pre-budget recommendation. And that’s to lower income taxes further. The alternative idea to this is to increase the tax exemption limit. Lowering tax rates seems absurd to me: They were reduced quite sharply over the years and are now among the lowest anywhere. Besides, this is unlikely to happen, given the huge government spending plans (and the tight fiscal glide path that is in focus). Why would they do it now when they did not do this in the pre-national election budget?

As an aside, the better idea is to increase the tax exemption limit to account for the lower purchasing power of money, i.e. inflation. Also, this would benefit the marginal taxpayer the most, which is the key constituency of any political party.

A pre-budget recommendation that comes up often but which I have not read this time is to scrap income tax. This one is a gem. Thank God the fans of this idea have gone quiet!

Let's think logically 

Now, I am not saying all this is not possible. Anything is possible. But is it logical?

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For the sake of our discussion today, I picked the three worst recommendations, which probably benefit you, dear reader. But they are unlikely to come through. So, why raise expectations, and go through the process of overcoming the disappointment later? I am just working on dashing hopes early in the cycle!

In conclusion, I recommend you pay heed only to those recommendations that fit into the government’s vision of India and yet fulfils your desire/s. Dreaming up recommendations in isolation and throwing them out there is a waste of time.

Now, having said all this, what’s your pre-budget recommendation? Write to me at contramoneyindia@gmail.com.

And, in case you are wondering about my list of recommendations, you will read it only in Mint later this week.

Rahul Goel is a finance and publishing professional with over 25 years of experience in the industry. You can tweet him @rahulgoel477.

You should always consult your personal investment advisor/wealth manager before making any decisions.