Financial sector players pitch for tax sops in Budget to boost capital markets

New Delhi, Jun 20 (PTI) Financial sector players on Thursday pitched for streamlining capital gains tax and reduction in Securities Transaction Tax in the upcoming FY25 Budget to boost capital markets.

In a pre-budget meeting with Finance Minister Nirmala Sitharaman here, some of the players urged the government to fix tax arbitrage wherever it exists.

This was the second Pre-Budget Consultation, which was attended by leading experts of the financial and capital markets sector, in connection with the forthcoming General Budget 2024-25, the finance ministry said in a post on X.

The full Budget for 2024-25 is expected to be presented in Parliament next month.

Emerging out of a two-hour meeting with the finance minister, Arun Kohli, MD & Country Head, Morgan Stanley India Company, said tax policies need to be stable and long-term oriented.

Participants also extended their suggestions on capital gains tax and securities transaction tax.

According to George Alexander Muthoot, MD of Muthoot Group, some of the players pitched for deepening the market and providing some tax incentives.

"We've suggested that since NBFC credit has grown and the RBI has flagged over-dependence on banks, allocation of funds from SIDBI and NABARD could increase for refinancing of NBFCs," FIDC Director Raman Aggarwal said.

NBFCs (non-banking financial companies) also sought clarity on GST demand on co-lending and payment of GST on service fees, Agarwal added.

Asset management companies discussed issues related to GIFT CITY also and the ways to retain capital within the country, he noted.

Agarwal also requested to provide an extension to 5 per cent Withholding Tax for all the ECB loans and bonds.

Under section 194LC withholding tax was applicable at 5 per cent on offshore borrowings through ECB loans/Bonds till June 30, 2023. The same was not extended in the recent amendment bill.

IVCA delegation led by Ashley Menezes, Partner and COO, ChrysCapital, urged the government to operationalise the 2022 budget announcement of blended finance through a Fund of Funds approach, managed by competent managers for directing capital to strategies in alignment with government priorities.

In addition, IVCA has suggested that Alternative Investment Funds (AIFs) should get tax parity and clarity like foreign portfolio investors (FPIs) so that tax litigation is minimised and results in ease of doing business.

Indian Private Equity and Venture Capital Association (IVCA) also made suggestions to make India an asset management hub like 'Make in India' and 'Manage from India' for global capital.

"We requested the Finance Minister to launch a Jan Nivesh campaign to create Financial inclusion for crores of Indians, who are stuck in Ponzi schemes and speculations," Kotak Mahindra AMC MD Nilesh Shah said.

There is a need to reach out to far more Indians now to secure their financial freedom. PTI DP DP BAL BAL