- Created: Thursday, 10 July 2014 13:10
Narendra Modi headed new government announced its first union budget on Thursday twisting and turning the markets until ending Nifty flat.
In order to promote capitalization in the market, government has worked on a bunch of measures. The major change bringing policies cover tax benefits, eased norms of regulations for foreign investors, much talked about corporate bonds besides creating a new instrument Bharat Depository Receipts (BDR), helping BSE benchmark Sensex to climb up 434 points.
Real Estate and Investment Trust (REIT) charmed up the market as Finance Minister Arun Jaitely announced special incentives for it. Financial sector reforms introduced a uniform system of Know Your Customer (KYC) service allowing inter-exchange of data records. Simple understanding of using a single demat account to access and work in all the transactions.
The union budget 2014 is aiming to increase the freedom in the markets allowing foreign investors and presenting BDR similar to ADR and GDR. In order to promote international trades, FM changed the terms and conditions of Indian Depositor Receipt (IDR) scheme easing its use. Additional, he proposed Indian debt securities international settlements in his plan.
FM said that he is willing to provide necessary incentives for REITS when asked about his plans in real estate market. “In innovation, a modified REITS 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 and other infrastructure projects,” Jaitley said.
Jaitely said that he is going to allow the liberalization facility of five percent withholding tax to all bonds issued by Indian corporate abroad, revising the validity date of the scheme to June 30, 2017. (At present, the tax rate varies across bonds and could be higher as well).
Banking system is receiving relaxation from the free-floating structures geared to enter the market. Fresh equity issues will be successful with eased norms for international investors. Major contribution is coming from NRIs who have been willing to participate in the market. Such instruments are designing for attract long-term investments in India.
Financial sector regulators should take early steps for a vibrant, deep and liquid corporate bond market, and necessary steps for currency derivatives market by eliminating unnecessary restrictions, according to Jaitley.
Financial Sector Legislative Reforms Commission (FSLRC) recommendations are processing under the leadership of new FM Jaitley and the process of consultancy with all the stakeholder will complete soon. He said, "the suggestions of the FSLRC are a necessity for better governance and accountability".
Jaitley addressed the tax concerns of Foreign Portfolio Investors (FPIs) stating that the income arising to this class of investors from transaction in securities is classifying under capital gains.