Our Bureau
New Delhi
The Union Cabinet on Wednesday recommended an ordinance to ease tax rules for foreign investors in some categories of securities, in a move aimed at supporting market sentiment as the rupee weakens and foreign money leaves Indian equities. The proposal was moved by the finance ministry, but the detailed changes were not immediately available.
The step comes at a difficult time for the currency and the stock market. The rupee has fallen 6 percent against the US dollar, while foreign portfolio investors have pulled out a record Rs 2.6 lakh crore from equities since January, according to the reports.
Officials see the ordinance as part of a wider policy response to the pressure on the economy. The move is also expected to work alongside Reserve Bank of India measures, which are likely to be announced on Friday after the Monetary Policy Committee meeting that began on Wednesday.
The reports said the government has been trying several ways to steady business confidence and soften outside pressure. These steps include a government-guaranteed credit line for businesses, a package for exporters and changes in duties, including fuel, to protect the economy from the impact of the West Asia war.
The tax proposal also reflects long-running concerns from foreign investors. Before the Union Budget, foreign portfolio investor representatives had sought changes in the capital gains tax regime for listed securities and had argued against both capital gains tax and securities transaction tax.
Tax experts cited in the report said repeated increases in long-term and short-term capital gains tax, along with securities transaction tax, have made India less attractive for some global investors. The ordinance, if notified, would mark another attempt by the government to slow foreign outflows and support the rupee.
