DTC: Investor Perspective!

Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

Q: As an investor who has most of your money locked in to the fortunes of corporate India. What do you think of the proposal to levy Minimum Alternate Tax (MAT) at 2% of assets? Is that something that worries you as well that on April 1, 2011, if this code becomes law, you are going to hit not only by capital gains tax but a lot of the companies that you are invested in are probably going to suffer the short-end of the match stick?

Jhunjhunwala: There is one thing I want to state that let us not believe that by levying a capital gains tax on long-term capital gain; you are already levying it on short-term capital gain. What you are going to gain is the difference between the STT and what you collect as capital gains tax. So, I think with the ease of administration of STT and the acceptance, I see no reason why we should abolish.

Q: Would you be okay if the STT rates were increased?

Jhunjhunwala: Maybe markets in the short-term may not take it well. But that's a totally different question.

Q: If revenue generation is the big idea then that's the lesson of the devils if they increase STT?

Jhunjhunwala: But if you are going in for a regime where you want to have lower taxes; so you lower corporate taxation, you lower individual taxation and you take up STT. I don't think it goes with an idea of basic code here.

Q: Since considerable amount of your money, wealth is invested in equity shares of corporate India and the proposed change in taxation for many companies in corporate India is MAT?

Jhunjhunwala: What I personally feel is the MAT, the way they have suggested is not bad. What is debatable is the rate of tax and the time period within which a newly created capital asset will be subject to this tax. So, instead of 2 it could be 1.5, it could be 1. Second thing is if I create a capital asset at least you should allow me three-five years to make the capital asset profitable, so you can levy it on existing assets. I think all of us have to pay taxes.

Q: Would you say this code is investor friendly or not?

Jhunjhunwala: I agree with what Mukesh says that I don't know when it will come. You should also have a debate that will it ever come and in what form it will come because bills in parliament stuck for seven-seven years. So what I feel is let us judge what comes in the final form then we will be able to really debate whether its investor friendly or not.