Search the Internet          Tips  Sites: Finance, Investment

Tax waiver on capital gains to boost floats

BS Corporate Bureau

The decision to exempt long-term capital gains from tax, provided the proceeds are channelised into primary issues, is being seen as a boost to the primary market.

"My first reaction is that it is definitely a positive sign for the primary market," said Shanti Ekambaram, executive director Kotak Mahindra Capital Company. She pointed out that it would deepen the retail market for initial public offerings as high net worth individuals and other individual investors who are the target of this exemption would try to save on their tax liabilities.

She, however, said it was not clear as to what kinds of capital gains was being talked about -- whether from the sale of securities in the primary market or a secondary market transaction.

The tax-break would also lead to many investors not taking the dividend-stripping route to avoid paying taxes on capital gains.

Instead of taking the devious route of dividend stripping and other routes for lessening the tax impact, investors can take the legitimate route and just pump in their money into the primary market.

Market watchers said with this move the government has managed to encourage a flow of funds into initial public offerings as well as done a little to ensure that individuals at least have a route to channelise their funds and not try devious means to evade taxes.

Source: Business Standard

ALSO READ:
The Budget 2001-2002 Special
Money

Tell us what you think of this report