Budget to bring in financial sector reforms, relief on STT

The STT is a key issue. What we have picked up from senior government officials is that it is unlikely that the STT will be abolished in one-go in this Budget. The reasons for that are while the department of revenue has agreed that the there is a better way to tax securities market transactions, it cannot be dealt with immediately because it would need an amendment to plug tax give-aways through the Double Taxation Avoidance Agreement with Mauritius and that will take time. Therefore, it is likely that the finance minister will give an indication of a roadmap. However, it is unlikely that there would be a wholesale abolition at this stage because clearly there still remain concerns on the revenue front. At this point of time this is what we can say and perhaps in the next few days it will crystallises further.

Also, the new pension scheme is another key issue. Anomaly, with regard to tax treatment of the gains, the public provident fund (PPF) is taxed at the very end when it matures. Therefore, what is being proposed is that the new pension scheme will also move to the three stage exemption process that is available for the PPF and that apart financial sector reforms could figure in this Budget. Remember that Pranab Mukherjee in his earlier avatar headed most of these GoMs which went into things like insurance FDI and banking regulation. Therefore the finance minister is likely to make a statement of intent with regard to perusing these proposals outside of the Budget.