Union Budget : FM says discussions on to further liberalise FDI policy

Also, MFs to be permitted to accept funds from foreign investors; proposal to raise FII limit in corporate bonds and to be allowed to invest in unlisted bonds too

New Delhi: Discussions are underway to further liberalise the Foreign Direct Investment (FDI) policy, finance minister Pranab Mukherjee announced today.

Presenting the Union Budget 2011-12, Mr Mukherjee said all prior regulations and guidelines have been consolidated into one comprehensive document in order to make the FDI policy more user-friendly. This is reviewed every six months and the last review was released in September last year, reports PTi

Besides, the finance minister said, mutual funds registered with the Security and Exchange Board of India (SEBI) would be permitted to accept subscriptions from foreign investors to meet the KYC requirements for equity schemes.

This would liberalise the portfolio investment route and enable Indian mutual funds to have direct access to foreign investors in Indian equity market, which had hitherto been restricted to foreign institutional investors (FIIs), sub-accounts registered with SEBI and NRIs.

It has also been proposed to raise the FII limit for investment in corporate bonds to enhance the flow of funds to the infrastructure sector. Mr Mukherjee said that the limit for investment in corporate bonds, with residual maturity of over five years, issued by companies in the infrastructure sector, is being raised by $20 billion to $25 billion.

This would raise the total limit available to FIIs for investment in corporate bonds to $40 billion.

Since most of the infrastructure companies are organised in the form of special purpose vehicles, FIIs would also be permitted to invest in unlisted bonds with a minimum lock-in period of three years. However, the FIIs would be allowed to trade among themselves during the lock-in period.

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Union Budget: Highlights 4

Here are some more announcements made by the finance minister during the presentation of the Union Budget in Parliament today.

  •  NABARD's capital base to be strengthened; Rs10,000 crore to be provided as short term credit fund.
     
  •  To increase the rural housing fund to Rs3,000 crore.
     
  •  To create a women's self-help group development fund with a corpus of Rs500 crore.
     
  •  Capital investment in fertiliser production to be considered as infrastructure sub-sector.
     
  • A new scheme to be introduced for refund of service tax on lines of drawback of duties.
     
  •  Proposal to introduce self-assessment of customs duty whereby importers and exporters will themselves assess payment of duty.
     
  •  Remuneration of anganwadi workers raised from Rs1,500 to Rs3,000 a month. Helpers at anganwadis to get Rs1,500, up from Rs750 previously.
     
  •  Old age pension to persons over 80 years raised from Rs200 to Rs500.
     
  •  Compensation of Rs9 lakh to be given to men of defence and central paramilitary forces for permanent disability and discharge from service.

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Union Budget: Corp tax surcharge reduced to 5%; MAT raised marginally

The reduction in surcharge will bring some cheer to industry which has been clamouring for a reduction in corporate tax rate to 25%. The finance minister also proposed a lower rate of 15% tax on dividends received by an Indian company from its foreign subsidiary

The reduction in surcharge will bring some cheer to industry which has been clamouring for a reduction in corporate tax rate to 25%. The finance minister also proposed a lower rate of 15% tax on dividends received by an Indian company from its foreign subsidiary

New Delhi: Bringing some cheer to the industry, finance minister Pranab Mukherjee today lowered the surcharge tax limit on corporate tax to 5% from 7.5% even while marginally raising the Minimum Alternate Tax (MAT), reports PTI.

The government retained the corporate tax at 30%, to be paid by domestic firms earning total income of over Rs1 crore a year. It increased the MAT to 18.5% from 18% on book profits.

Presenting the Budget for 2011-12, finance minister Pranab Mukherjee said: "My initiative of phasing out the surcharge continues. I propose to reduce the current surcharge of 7.5% on domestic companies to 5%."

The minister also proposed to bring developers in Special Economic Zones (SEZs) under the MAT.

"By the measure to ensure equal sharing of corporate tax liability, I propose to levy MAT on developers of SEZs as well as units operating in the states," Mr Mukherjee said.

The reduction in surcharge will bring some cheer to industry which has been clamouring for a reduction in corporate tax rate to 25%.

Industry chambers have been demanding reduction in corporate tax to 25% to spare the India Inc with more money to undertake big-ticket investments.

With a view to providing incentive for Indian companies to repatriate money from offshore subsidiaries, the minister also proposed a lower rate of 15% tax on dividends received by an Indian company from its foreign subsidiary.

"I do hope this will allow funds to flow to India," he said.

The latest proposals come two years after the government did away with surcharge on income tax during the 2009-10 Budget.

During last year's budget also, the government had reduced surcharge on corporate tax while hiking the rate of MAT.

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