Mumbai : The government announced a slew of measures to enthuse the capital markets in its Union Budget for 2014-15 (Apr-Mar) that was presented by Finance Minister Arun Jaitley.
In his maiden budget, Jaitley proposed liberalising the American depository receipt, global depository receipt regime to allow issuance of depository receipts on all permissible securities.
He also proposed revamping the Indian Depository Receipt, launching a new instrument called Bharat Depository Receipt and allowing international settlement of Indian debt securities.
Jaitley urged financial sector regulators to take early steps for deepening the corporate bond and currency derivatives markets by eliminating unnecessary restrictions.
The finance minister also proposed extending a liberalised facility of 5% withholding tax to all bonds issued by Indian corporate abroad, extending validity of the scheme to Jun 30, 2017.
At present, the tax rate varies across bonds. He also announced incentives for real estate and investment trust (REIT).
Jaitley said: “As an innovation, a modified REIT-type structure for infrastructure projects is also being announced as Infrastructure Investment Trusts (InvITs), which would have a similar tax efficient pass through status, for PPP (public- private-partnership) and other infrastructure projects.”
These instruments would attract long term finance from foreign and domestic sources including the non resident Indians (NRIs).
With respect to strengthening the regulatory framework for commodity markets, the government plans to implement Warehouse Development and Regulatory Authority’s transformation plan to invigorate the warehousing sector and significantly improve post-harvest lending to farmers against negotiable warehouse receipts.
In the budget, the government has also proposed introducing uniform Know-Your-Customer norms with inter-usability of the KYC records across the financial sector and a single operating dematerialised account so that consumers can access and transact all financial assets through this one account.
In a move aimed to encourage foreign fund managers to shift to India, Jaitley proposed to provide foreign portfolio investors’ income arising from transaction in securities to be treated as capital gains.
The Budget also clarified that companies and mutual funds need to pay dividend distribution tax on the gross amount of dividend distributed to shareholders and unit holders. -Cogencis
