Comments
The Budget, to be presented by Finance Minister Arun Jaitley on July 10, will give the country a glimpse of how the government plans to use its resources.
Prime Minister Narendra Modi is expected to focus on promoting economic growth in a swift manner.
One of the main drivers and indicators of a government’s economy is its capital market. The Budget presents a great opportunity for reforms in retail, FDI, and FII participation in both the equity, and futures and options segments.
UK Sinha, chairman of SEBI met the Finance Minister on Thursday to push forward potential reforms. Sinha is hoping that Jaitley pushes reforms to increase retail investor participation in equities and mutual funds.
Impact on markets So, what are the changes we can possibly expect from the Budget that would impact markets?
For one, there is a strong speculation that the Securities Transaction Tax (STT) might be reduced. As of now, the STT is a tax applicable to sell-side transactions on intra-day equity transactions at a rate of 0.025 per cent, and a rate of 0.1 per cent on both buy- and sell-side transactions for overnight positions.
The government earns around ₹6,000 crore in STT revenue annually, which amounts to just 0.05 per cent of GDP. But cutting the STT on the equity segment by just 50 per cent would have an immediate positive impact: volumes would shift from F&O to the equity segment. The STT is by far the largest cost impediment that is preventing investors from participating more actively.
Other measures that can be expected include adjustments to the popular Rajiv Gandhi Equity Scheme, which gives tax benefits to investors who earn an annual income of less than ₹12 lakh.
Re-think on retrospective taxes?
There are talks of removing retrospective taxes that apply to transfers of capital assets from foreign investors; that is, foreign investors investing in India should not be taxed in later years. This would deter FIIs from investing in India.
Debt market reforms There may be changes in the debt market as well. Since we can expect FDI and FII inflows to increase and general investments in India to surge in the near future, it is important for funding sources to be readily available.
Tax incentives in debt or on returns on investments (through debt) are likely. With only 5 per cent of Indians participating in the capital market, the Finance Minister will look to the above measures to push that figure up.
The writer is Cofounder, RKSV
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.