Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts received some favourable attention in the Budget. Finance Minister Arun Jaitley hopes to use these vehicles for attracting investment in infrastructure and PPP projects.
REITS units that are listed on a stock exchange would attract similar tax treatment as equity shares. They would be subject to securities transaction tax and short-term capital gains would be taxed at 15 per cent while long-term capital gains would be exempt.
The capital gains on disposal of assets by REITS will be taxable at the hands of the trust. But if the capital gains are distributed to unit holders, then the component of distributed income attributable to capital gains would be exempt in the hands of the unit holder. Also, the interest income received by the trust from the special purpose vehicle will be accorded pass through treatment, that is, there will be no tax on such income in the hands of the trust.
A long-standing demand of foreign institutional investors was also granted by the Finance Minister when he proposed that the income of fund managers will be treated as capital gains and not as business income, as is the practice now.
Mr. Jaitley has also proposed to increase the rate of tax on long-term capital gains on debt mutual funds from 10 to 20 per cent. This is to bring debt schemes on par with other debt instruments and bank deposits.
Indian Depository Receipts (IDR) are set for a revamp and will be replaced by Bharat Depository Receipt, which the Finance Minister says will be more liberal and ambitious.
Small investors have reason to smile because the Budget proposes to introduce uniform KYC (know your client) norms and there will be inter-usability of the KYC records across the financial sector. This basically means that investors don’t have to go through the cumbersome process of satisfying KYC norms in different places.
There is also a proposal to introduce a single operating demat account where investors can access and transact all financial assets.
The Finance Minister has also set financial year 2016-17 as the deadline for companies to adopt Indian Accounting Standards mandatorily. It will be voluntary in 2015-16.
