Govt can offset any negative impact by lowering corporate tax rates, mitigating note ban impact
Investors in India are bracing for higher taxes and fewer incentives from the government’s annual Budget 2017 on February 1, as the focus shifts to wringing out revenues to finance giveaways and higher public investment.
While Prime Minister Narendra Modi’s administration is widely seen as being friendly to businesses and investors, it is not expected to announce any dramatic moves at a time when the economy is under pressure from a cash squeeze.
Among expected measures are a hike in a transaction tax on stock derivatives trading and a less beneficial approach to long-term capital gains tax exemptions, according to analysts.
India is also set to provide guidelines for new rules in April that will crack down on tax havens, while foreign portfolio investors are seeking clarity behind ‘indirect transfer’ rules that could increase tax liabilities for overseas funds.
But any negative impact from such measures could easily be offset, should the government also lower corporate tax rates or provide incentives to sectors hit by the government’s surprise decision in November to abolish high-value banknotes, analysts said. Read more