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

New Delhi: 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.

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.