Investors brace for transaction tax hike, less friendly Budget

Budget 2017 Date - Investors in India are bracing for higher taxes and fewer incentives from the government’s annual Budget on February 1, as the focus shifts to wringing out revenues to finance giveaways and higher public investment.

While Prime Minister Narendra Modi’s administration is widely seen as being friendly to businesses and investors, it is not expected to announce any dramatic moves at a time when the economy is under pressure from a cash squeeze. 

Among expected measures are a hike in a transaction tax on stock derivatives trading and a less beneficial approach to long-term capital gains tax exemptions, according to analysts.

India is also set to provide guidelines for new rules in April that will crack down on tax havens, while foreign portfolio investors are seeking clarity behind ‘indirect transfer’ rules that could increase tax liabilities for overseas funds.

But any negative impact from such measures could easily be offset, should the government also lower corporate tax rates or provide incentives to sectors hit by the government’s surprise decision in November to abolish high-value banknotes, analysts said.

“We can certainly see a sensitivity for investor concerns, and the government wants to do things like ease the cost and complexities of doing business, improve India’s competitiveness rankings and attract foreign investors,” said Rajesh H Gandhi, a tax partner at Deloitte Haskins & Sells, adding, “However, at the same time, the government has revenue pressures as it seeks the meet its fiscal targets.”(Read More)

Investors brace for transaction tax hike, less friendly Budget 2017

Union Budget - Investors are bracing for higher taxes and fewer incentives from the government's annual Budget on February 1 as the focus shifts to wringing out revenues to finance giveaways and higher public investment.

While Prime Minister Narendra Modi's administration is widely seen as being friendly to businesses and investors, it not expected to announce any dramatic moves at a time when the economy is under pressure from a cash squeeze.

Among expected measures are a hike in a transaction tax on stock derivatives trading and a less beneficial approach to long-term capital gains tax exemptions, according to analysts.

India is also set to provide guidelines for new rules in April that will crack down on tax havens, while foreign portfolio investors are seeking clarity behind "indirect transfer" rules that could increase tax liabilities for overseas funds.

But any negative impact from such measures could easily be offset should the government also lower corporate tax rates or provide incentives to sectors hit by government's surprise decision in November to abolish high-value banknotes, analysts said.

"We can certainly see a sensitivity for investor concerns, and the government wants to do things like ease the cost and complexities of doing business, improve India's competitiveness rankings and attract foreign investors," said Rajesh H Gandhi, a tax partner at Deloitte Haskins & Sells(Read More)

Budget 2017: Measures that could impact markets

Budget 2017 Date - Investors in India are bracing for higher taxes and less incentives from the government's annual budget to be unveiled on Feb. 1 as the focus shifts to wringing out revenues to finance giveaways and higher public investments to support the economy. For story see

Detailed below are the main expectations of measures that could impact markets:

GUIDELINES FOR GENERAL ANTI AVOIDANCE RULES (GAAR)

- Government set to announce detailed guidelines behind GAAR, which will be implemented starting on April 2017

- GAAR is meant to crack down on tax havens, making it harder to claim some tax exemptions

- Key clarification awaited is whether GAAR will take precedence over individual tax treaties, including Singapore and Mauritius

TAXES UNDER INDIRECT TRANSFER RULES

- Government expected to say whether foreign portfolio investors, private equity funds and venture capitals are liable to pay indirect transfer taxes

- Confusion created after tax department said in December such investors could be liable to pay taxes if more than 50 pct of a fund's or investment vehicle's assets are based in India under some conditions

- Tax department also said indirect transfer tax could be charged under certain ownership and investment levels(Read More)

Farm insurance, credit access schemes expected in Budget 2017: Kakra of PwC

Budget 2017 - In an effort to double the agriculture production by 2020, the government should introduce schemes for greater access to farm credit in Budget 2017, Ajay Kakra, leader (Food and Agriculture) PwC, said. 

Kakra also underlined that Union Finance Minister Arun Jaitley should also introduce policies for incentives towards irrigation and insurance of farm crops. He further highlighted the need for a digitised farming economy in the longer run. 

Kakra was answering questions on what announcements related to the agriculture sector are expected in Budget 2017 during a Business Standard live chat. Excerpts: 

In his New Year's eve speech, Prime Minister Narendra Modi talked about giving certain concessions and incentives to farmers. It is hoped that the government will follow that up with further concessions and incentives for the agriculture sector and the agro-input industry in the coming Budget. What can we expect?

One of the key focus areas of the honourable prime minister is to provide greater access to farm credit. In my view as well this can be a key area of focus to strengthen the farming sector. As far as the agriculture input sector is concerned, access to seed, agrochemical and fertiliser is an essential requirement for ensuring farm output. The Budget can look at strengthening the distribution network of agri-inputs to ensure availability at the time of sowing or beginning of the season. The rabi sowing has been more or less normal while the offtake of fertiliser has also not been dampened due to cash crunch at the time of demonetisation.(Read More)

Nifty's one week pre-budget rally biggest compared to last 9 budgets

Budget 2017 Date - Nifty gained the most in the one-week pre-budget rally as compared to the last 9 budgets as investors remained optimistic about pro-market policies by the Finance Minister Arun Jaitley in Union Budget 2017.

With Budget 2017 four days away, Nifty rallied 3.5% for the week, its highest weekly gain since May 27. The index has gained 6% in the year so far.

Even though, not every Budget is preceded by a pre-budget rally, this year bulls have tightened their grip as government is expected to take measures to boost demand after the demonetization freeze.

The previous biggest pre-budget rally occurred in the election year 2009, during the interim-Budget, when the index rose nearly 4% in the week prior to it. Last year, the 50-share index had lost 2.5%.

Jimeet Modi, CEO, SAMCO Securities believes the market movement in the run-up to Budget depend more on the underlying market conditions, not so much on budget events per se.  

“History suggests that 70% of the time budgets are in line with the underlying market moods, however during other 30% of time markets have turned due to budget events. In reality such turns are caused due the inherent overbought or oversold conditions of the market itself,” said Modi.

“In 2016, there was nothing so great about the budget, but still the indices started to rise smartly because they were in deep oversold conditions.  Similarly in 2015 budget, there was nothing really bad about the first budget of the Modi government, but still the markets made a top and started to roll down because inherently it was heavily overbought mesmerized in too much optimism,” he added.(Read More)