Investors in India are bracing for higher taxes and fewer incentives from the government’s annual budget on Feb 1 as the focus shifts to wringing out revenues to finance giveaways and higher public investment. Governments administration is widely seen as being friendly to businesses and investors, it 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 could also provide additional details for new rules in April that will crack down on tax havens, after the government on Friday provided some, but not all, key clarifications.

Foreign portfolio investors are also 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
government’s surprise decision in November to abolish high-value banknotes, analysts said.

Currently, investments sold after at least a 12-month holding period are exempt from taxes, while anything below that is taxed at up to 20 percent of the gains.

Source: indianexpress.com