Domestic investors, MFs pitch for easier tax rules

Urge government to restore the rebate on securities transaction tax and make uniform KYC norms mandatory for financial products

Market participants sought rationalisation of the securities transaction tax and discussed measures to increase retail participation in the equity market, at a meeting called by the finance ministry on Wednesday.

The meeting, convened by the department of economic affairs (DEA) ahead of the Budget for 2017-18, was attended by nearly 40 market participants, including Life Insurance Corporation of India, UTI Mutual Fund, Birla Sun Life, JM Financial and Kotak Mahindra Mutual Fund.

"It was an interactive session with domestic financial institutions. The subjects discussed included development of market infrastructure, widening of the investor base and retail participation, and deepening of the corporate bond market," Shaktikanta Das, secretary, department of economic affairs, said after the meeting.

The meeting, attended by representatives of the department of revenue, Securities and Exchange Board of India and the Reserve Bank of India, also discussed integration of various segments of the market.

"Concerted steps are required by the authorities to increase retail participation in the financial market," said Ashish Kumar Chauhan, managing director and chief executive officer of the BSE .

Market participants asked the government to restore the STT rebate on the securities transaction tax to traders and make uniform know-your-customer norms mandatory for financial products.

"We have asked for restoration of the rebate on the securities transaction tax that was available till 2007-08," said D K Aggarwal, head of SMC Investments. Before the STT rebate was removed in 2007-08, traders were able to deduct the securities transaction tax paid from their income tax due on income from the securities business. Now the securities transaction tax paid is not allowed as a deductible expense.

Das said the market participants' suggestions would be considered by the government. The department of economic affairs had called a similar meeting with foreign portfolio investors on Tuesday.

On deepening of the bond market, Aggarwal said there were suggestions for the exchange platform to be so used and that demat facility should be available.

Chauhan added most of the discussion was on a unified know-your-customer norm and a single framework for all intermediation.