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Mukesh Butani Managing Partner, BMR Legal
Finance Minister Arun Jaitley has pulled off a crucial Budget amidst nervousness on the demonetisation move and growth slowdown. While there is a lot in the fineprint, two important amendments stand out: reduction in tax rates and benefit to Foreign Portfolio Investors (FPIs) and offshore lenders.
Instead of an across-the-board reduction in tax rate, the Budget has proposed a reduction to 25 per cent for companies with annual turnover of up to ₹50 crore. The move is largely driven by revenue considerations, given that only 4 per cent of corporate taxpayers contribute materially to this segment. For individual taxpayers, respite came in the form of a new low slab rate of 5 per cent without a corresponding change in slabs. Both rate proposals seem revenue neutral, given the 10 per cent surcharge levy which will now be triggered at income above ₹50 lakh.
Given the anticipated rate hike in the US and tapering growth in India, FIIs have a muted approach towards emerging markets. India was not spared, making 2016 the worst in the past eight years in terms of outflows. To revive the sentiments, the Budget has proposed a legislative amendment to clarify that Category I and Category II SEBI registered FPIs will be exempted.
(With inputs from Amit Bablani)
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