In its first concerted move on the economy, the government has embarked upon clearing away the cobwebs on various tax issues. India, back in the reckoning for global investments, may reap the dividend
Jul 11 2014 : The Economic Times (Bangalore)
BUDGET AT A GLANCE : INVESTOR - DON'T FEAR THE TAXMAN
In its first concerted move on the economy, the government has embarked upon clearing away the cobwebs on various tax issues. India, back in the reckoning for global investments, may reap the dividend
CHEAP MONEY Measure Extension of 5% Withholding Tax on Corporate Bonds till June 30, 2017 Impact
Companies can raise cheaper foreign exchange loan for long-term investments in India. The tax incentive will be extended to all types of bonds instead of only infrastructure bonds.STANDING TALL Measure New Tax Regime for REIT and Infra Investment Trust Impact
Property stocks such as DLF, Indiabulls, Prestige Estate, HDIL and DB gain 5-9%. Realty fund investors will not face harassment from tax officials.
BONDING TIME Measure For Debt MFs, Long-term Capital Gains Tax Raised to 20% from 10%; Long Term will be 3 Years, Not 1 Year Impact
Fixed maturity plans with tenure above 1 year will be hit. A lot of money will move to fixed deposits and stocks. Long-term bonds will be more in demand. Also, shares of unlisted companies will attract a lower tax rate of 20% only if they are sold after 3 years as against 1 year now. (The tax rate is unchanged at 30% for shares sold before 3 years).
BURNING HOLE IN POCKET Measure Excise on Cigarettes Raised Impact
VST shares down 18%, but ITC inched up 0.2%. Why? The excise structure will make VST cigarettes more expensive; also, ITC has better pricing power.
CASH IN HAND Measure Long-term Funds of Banks Freed of Reserve Requirement Impact
May revive talks of HDFC and HDFC Bank merger. Shares of IDFC, which will soon become a bank, was up 8.6%; return on equity may rise from 12% to 20%.
CHANGING GOALPOST Measure Change in Formula to Calculate Dividend Distribution Tax Impact
All companies receiving dividend from subsidiaries and further distributing dividend to shareholders will face 16-17% higher dividend distribution tax payout. Companies to lower dividend payout.
Companies can raise cheaper foreign exchange loan for long-term investments in India. The tax incentive will be extended to all types of bonds instead of only infrastructure bonds.STANDING TALL Measure New Tax Regime for REIT and Infra Investment Trust Impact
Property stocks such as DLF, Indiabulls, Prestige Estate, HDIL and DB gain 5-9%. Realty fund investors will not face harassment from tax officials.
BONDING TIME Measure For Debt MFs, Long-term Capital Gains Tax Raised to 20% from 10%; Long Term will be 3 Years, Not 1 Year Impact
Fixed maturity plans with tenure above 1 year will be hit. A lot of money will move to fixed deposits and stocks. Long-term bonds will be more in demand. Also, shares of unlisted companies will attract a lower tax rate of 20% only if they are sold after 3 years as against 1 year now. (The tax rate is unchanged at 30% for shares sold before 3 years).
BURNING HOLE IN POCKET Measure Excise on Cigarettes Raised Impact
VST shares down 18%, but ITC inched up 0.2%. Why? The excise structure will make VST cigarettes more expensive; also, ITC has better pricing power.
CASH IN HAND Measure Long-term Funds of Banks Freed of Reserve Requirement Impact
May revive talks of HDFC and HDFC Bank merger. Shares of IDFC, which will soon become a bank, was up 8.6%; return on equity may rise from 12% to 20%.
CHANGING GOALPOST Measure Change in Formula to Calculate Dividend Distribution Tax Impact
All companies receiving dividend from subsidiaries and further distributing dividend to shareholders will face 16-17% higher dividend distribution tax payout. Companies to lower dividend payout.
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