CJ George, Managing Director, Geojit BNP Paribas, has said the budget has removed some anomalies and extended the principle of equal treatment for similar entities as far as the capital markets are concerned.

The centrepiece of this is the removal of the capital gains tax anomaly that existed for Real Estate Investment Trust (REIT) units and other listed securities. The existing provision in the law meant that an investor had to wait for three years to claim long-term capital gains tax exemption, which made REITS unviable. 

REITS onboard

The Finance Minister has done away with this, with his proposed equal treatment for REITs and other listed equity shares. This could help in listing of REITs worth at least ₹1 lakh crore in the stock exchanges. The provision to smoothen NRI investments is a welcome one, he said.

Previously, the RBI was entrusted with rules regarding capital controls on equity flows from abroad. The government has now transferred this power and can be seen as part of a broader effort to abolish portfolio investment scheme (PIS), in effect, treating the NRI investor on par with the resident investor. 

Once this notification finally comes through, the market may expect more inflows from abroad on this account from NRIs, he said.

As expected, the FMC is now merged with SEBI to strengthen the regulation of commodity derivatives markets and to reduce harmful speculation. As a result of this merger by amending RBI Act and Securities Act along with the Finance Bill, banks, financial institutions along with FIIs will get access to the Indian commodities derivatives market, which is a long-standing demand from them.

This will help in deepening and strengthening the commodities market. The clarification that MAT will not apply to FIIs is a great relief and will lead to more investment from FIIs, George said.

‘Fine balancing act’

Federal Bank Managing Director Shyam Srinivasan said the Finance Minister has done a fine balancing act by addressing the fiscal challenges and dealing with the high expectations from the government.

He noted that the government’s focus was on removing the bottlenecks for improving infrastructure and enabling ease of doing business. “The increase in road and railway outlays, and the increase in infrastructure spending by ₹ 70,000 crores would give the much-needed fillip to the infrastructure sector,” he said. “Implementation of the GST and the introduction of Bankruptcy Act would improve ease of doing business and help bring in more private investments.”

The introduction of Universal Social Security and Atal Pension Yojana were fine steps in social security. Higher tax relief on investments in NPS would help boost savings and investment in infrastructure and, at the same time, ensure that people earned sufficient pension income after their earning age.

Related Topics