Business News

Mumbai: Amid a sharp decline in Indian equities driven by aggressive selling by foreign investors, there is a growing clamour among a section of market participants seeking easing of rules on taxing their long-term capital gains from stocks. As India remains one of the few countries that taxes foreign portfolio investors on the gains made in the country's equities, some market participants said reduction in these taxes could make Indian equities more lucrative for these investors."Globally, very few countries impose capital gains tax on listed securities. There has always been a demand to remove it," said Uday Ved, partner - tax services at KNAV, an accounting and consultancy firm.The renewed calls for removal of long-term capital gains tax on equities for foreigners come against the backdrop of record outflows. In the past five months, overseas investors have sold Indian equities to the tune of ₹2.8 lakh crore, causing the Nifty to drop over 15%."We need to be globally competitive in taxation. In my view, this should be revisited, if not entirely waived, because many FIIs are not taxed globally," said Gurmeet Chadha, CIO of Complete Circle Wealth Solutions. "Rolling back some of it or tweaking it could be beneficial. The cost of investing in Indian markets should be reviewed."In Budget 2024, finance minister Nirmala Sitharaman increased taxes on capital gains. Short-term capital gains (STCG) tax - profits booked within one year of purchase - was raised from 15% to 20%, while long-term capital gains tax - profits booked after one year - on equities increased from 10% to 12.5%. The LTCG exemption limit was raised to ₹1.25 lakh per year.FPIs argue that India is among the few larger markets that tax foreign capital, unlike the US, Europe, the UK, Hong Kong, China, Japan, and Singapore, which do not impose such taxes on foreign investors.Singapore-based Helios Capital's founder and chief investment officer Samir Arora has been the most vocal on the issue of late."Eliminating capital gains tax for foreign investors would boost liquidity and make Indian capital markets more dynamic," said Arora during a recent media event. He argued weighing the benefits of lower capital gains tax on flows against tax collections by the government."In 2022-23, the government collected ₹99,000 crore (around $10 billion) in capital gains tax," said Arora. However, this was during a peak market cycle. Over a typical five-to-seven-year cycle, such collections occur in just one year, while in other years, tax revenue from capital gains is significantly lower, around $2-3 billion."According to Rajesh Gandhi, partner, Deloitte India , "For FPIs which are tax exempt in their home country such as sovereign funds, university funds and certain kinds of pension funds, Indian taxes become additional cost since they generally don't pay taxes in their home country."This means these funds, which pay capital gains in India, do not get to set off or claim relief in their home country under Double Taxation Avoidance Agreements (DTAAs)."When you invest in India they take 20% tax and it cannot be recovered," said Arora. "You can't set it off as they don't have tax in their home country."118694751Timing of the DemandSome market participants question the timing of these calls to ease tax rules on capital gains of foreigners."Should we go out of our way to please foreign investors?," asked Nilesh Shah, MD, Kotak AMC. "The answer is probably no. Those advocating for lower LTCG tax believe that most of the world operates this way.""As long as India delivers strong earnings growth and governance, potential returns will remain high, and FPIs will adjust," said Shah. "If we are confident about delivering better growth and governance, there is no urgent need to alter LTCG tax."Capital Gains Tax Relief For AllIt may not be possible to provide tax benefits for only a section of foreign investors in India."Even if the government rolls it back, it should be done uniformly for all investors, not just FPIs," said Ved. "Rolling back LTCG will certainly provide all of them relief."

Credit monitoring by women has gone up by 42 % in 2024 who have also managed to improve their credit score according to a report by credit bureau Transunion Cibil.At the same time credit penetration has also increased with more women borrowers coming from semi urban and rural areas and from the age group below 30 years, it said.27 million women borrowers in India were actively monitoring their credit in December 2024, 42% higher than the approximately 19 million women who were doing so in December 2023 according the report titled “From Borrowers to Builders: Women’s Role in India’s “Financial Growth Story”, published by TransUnion CIBIL , Women Entrepreneurship Platform’s (WEP) of Niti Aayog and MicroSave Consulting (MSC).The number of women availing credit in India has increased at a compound annual growth rate (CAGR) of 22% between CY 2019 and 2024 with 60% of borrowers coming from semi-urban and rural areas.. While consumption loans continue to be the preferred products held by women borrowers, the report also show that more women are also availing business loans. In 2024, the number of new loan accounts opened by women for business purposes (business loans, commercial vehicle and commercial equipment loans, loans against property) grew by approximately 37 lakh, with disbursement totaling Rs 1.9 lakh crore, compared to approximately 8 lakh new loan accounts for business purposes and total disbursement of Rs 0.7 lakh crore in 2019. But these loans constituted only 3% of overall loans availed by women borrowers in 2024.Consumption loans remain the most preferred credit product among women borrowers. The share of women borrowers with active consumption loans in their wallet grew to 36% by December 2024, from 33% in December 2019. Agri and gold loans combined were held by 34%of women borrowers by December 2024 compared to 32% in December 2019. Business loans witnessed the highest share shift, with 16% of women borrowers by December 2024 holding a live business purpose loan, compared to 9% in December 2019.

Markets regulator Sebi has allowed all non-banking financial companies (NBFC), including housing finance companies, to invest in security receipts issued by Asset Reconstruction Companies (ARCs), a move aimed at encouraging investments in the bad loans space. This has widened the scope of participants who can acquire security receipts from ARCs, thereby boosting liquidity in the distressed asset market. ARCs are set-up to acquire bad loans from banks and financial institutions after appropriate haircuts and issue security receipts (SRs). In a gazette notification issued on February 28, Sebi said, "all NBFCs including HFCs regulated by the Reserve Bank of India (RBI) are hereby specified as qualified buyers for the purposes of SARFAESI Act (the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002)". This comes with safeguards to avert defaulting promoters from claiming back the secured assets through SRs. Sebi said that such "NBFCs including HFCs will have to ensure that the defaulting promoters or their related parties do not directly or indirectly gain access to secured assets through security receipts; and such NBFCs including HFCs shall comply with such other conditions as the RBI may specify from time to time". As per the SARFAESI Act, only qualified buyers can invest in security receipts.