Rethink securities' taxes to purposefully boost sentiments
Further, reports say that the government is planning to liberalise investment norms for Foreign Portfolio Investors (FPI), based on the recommendations of an expert panel headed by former RBI Deputy Governor H R Khan.
Reportedly, FPI would soon get the go ahead to invest in Real Estate Investment Trusts (REIT) and also municipal bonds. The proposed green signal for FPIs to invest in financial products like REITs should boost funds flow for much-needed infrastructural funding.
REITs provide stock-market listing of funds that invest in urban real estate, and the initial lot of REIT investors in the Indian market have firmed up plans for follow through funding on the ground.
Note that FPI have sold over Rs 26,000 crore in equities thus far this year. And the Khan committee is reportedly planning to expand the range of securities FPIs can invest in.
Hence the improvement somewhat in investor’ sentiments of late, and the consequent smart rally on the markets. So domestic cues seem to be boosting investors’ confidence.
The way forward is to rationalize the long-term capital gains tax now imposed on equity investments, and do away with the securities transactions tax (STT). The latter was introduced when the former was dropped; now that the long-term capital gains tax on equities is back, it needs to be lowered and STT done away with.