Mumbai, Feb 1 (PTI) With tax on long term capital gains (LTCG) on equities left untouched by the Government, experts today welcomed the Budget, saying this decision will calm the stock market nerves and boost investor participation.
There was speculation that the Government would raise tax on long term capital gains on securities in the Union Budget. The market had got worried after Prime Minister Narendra Modi in December hinted on increasing taxes on capital markets and the need for all sections, including market players, to contribute to the national exchequer.
"No bad news on long term capital gains tax is relief for equity investors. Overall, Union Budget is positive for economy in general and equity markets in particular," said Sharekhan research head Gaurav Dua.
"The Government has presented a reasonably positive Budget, given the constraints, from equity markets perspective. No mention of changes in capital gains for listed securities and concessions to FPIs will soothe market nerves," Reliance Securities research (head) Rakesh Tarway said.
Echoing similar sentiments, HDFC Securities MD & CEO Dhiraj Relli hailed the Government's decision not to tinker with the equity capital gains tax regime. "The markets are rejoicing as they can continue to enjoy the fruits of investment," he said.
According to TradingBells COO Parth Nyati, IPO for public sector undertakings like IRCTC, IRFC and IRCON is a pleasant surprise and would ensure more retail participation.
"Long term capital gain tax on equity markets remained unchanged which will further boost investor participation. Service Tax and STT also remained unchanged," Nyati said.
Metropolitan Stock Exchange of India (MSEI) COO Abhijit Chakraborty said FPIs being exempted from indirect transfer provision address a key concern of foreign investors.
"Listing of IRCTC and IRFC shall be significant catalyst for capital markets. More PSU ETFs shall aid the growth of this emerging sector in the market," he added.
Observing that the market speculation around LTCG, corporate tax rate cut across various forums was not mentioned in any form in the Budget, Systematix Shares & Stocks MD Nikhil Khandelwal said the Budget had more 'ears on the ground' than 'ears on the market expectations'.
Kotak Securities senior vice president (PCG Research Dipen Shah lauded the absence of any changes in capital gains tax, adding apprehensions related to it have been erased.
"Focus on markets will now shift to the global factors and the remaining quarterly results," he added. (MORE)(REOPENS BCM19)
ICICI Securities MD and CEO Shilpa Kumar said the market would welcome the proposed fresh Government issuances.
She added, "Success of the CPSE ETF follow-on issue and general positive sentiment for IPOs are evidence of investor appetite for good issuances and the Government's ability to tap capital markets for significant issue sizes through well structured and well timed issues."
Further, seeking to assuage concerns of overseas investors, the Government today announced relief for well- regulated FPIs from tax liability arising out of sale of assets or shares in a foreign company due to redemption of an investment within India.
PwC partner Suresh Swamy said, "Investors in India focused FPIs will be happy with this clarification since many of them were staring at a potential tax liability."
"The rationale for excluding investors in Category III FPIs is however unclear," he added.
Riaz Thingna, Director, Grant Thornton Advisory, said the exemptions from indirect transfer provisions to category I & II FPIs would provide relief to the foreign investors who were concerned over taxation under indirect transfer provisions as clarified by the CBDT late last year, although the clarification was kept in abeyance post representations.
"Therefore, with this proposed amendment, the CBDT circular would be Null and void for such FPIs," Thingna said.
Category I FPIs include sovereign wealth funds and central banks and category II includes mutual funds and banks.