Budget 2018: I-T benefits to easy capital gains tax, expectations for IFSC

V Balasubramaniam, MD & CEO of India INX, India's first international exchange, shares his Budget expectations with regard to IFSC

At India’s first International Financial Services Centre, getting onto par with other financial centres is key.  Currently, India’s IFSC mission is mired under several disadvantages which make us a less preferred option when compared to US, London, Singapore and Hong Kong.
 
On the direct tax side, we hope the following key areas will be addressed: 
 
* Short Term Capital Gain Tax needs to be done away with for any transaction that is done through IFSC in both derivatives and debt.

We have seen the impact of this already in the way in terms of the cost of doing a derivative transaction today at IFSC vs Singapore or London.  We have also seen the impact of this in terms of volume erosion in India market once Dubai introduced single stock futures and now we are expecting Singapore to introduce them from February.  The key reason why investors prefer to trade on Indian securities from global venues like London, Singapore and Dubai is because of less capital gains tax friction.  

* Last budget it was announced that capital gains arising from transfer of non-derivative securities between two non-residents outside India will not be taxable in India.  Extending similar benefits on capital gains arising from transfer of securities between IFSC entities will bring us truly at par with other jurisdictions

* Also, at IFSC in India, the income tax benefit is available for first 10 years as compared to upto 50 years at Dubai

* Long Term Capital Gain Tax should also be done away with for bonds traded at IFSC.   This is a pre-requisite to develop a vibrant corporate bond market at IFSC

* For an investor ecosystem to develop, the taxation rates for funds (AIFs) need to be brought at par with other types of IFSC units that are being set up for providing financial services

* Clarity on applicability of double taxation treaty at IFSC as a deemed offshore jurisdiction is important.  While the regulator has already allowed FPIs to participate in commodities at IFSC, lack of clarity on applicability of tax treaty has been the deterrent for towards participation

* Today, London and Singapore do not have any withholding tax for issuers who raise funds there.  We hope that in the budget, bonds issued at IFSC will be exempted from withholding tax.

The author is MD & CEO of India INX