Budget 2018 impact on financial investors:
- 10% tax on dividends from equity schemes: It will impact arbitrage funds, which used to enjoy almost tax free status due to daily dividend option. Now post tax arbitrage returns will get compressed by 10%, but these would still be better than liquid funds and most of the ultra short funds.
- LTCG on equities, but with grandfatheree status: While investors will pay 10% on incremental long term equity gains from here on, the expected returns from Indian equities is still better than other asset classes. We don’t think this will drive away investors from the market. Hopefully STT be removed in due course too.
- SEBI to ask large corporate’s to use bond markets for 25% of borrowing: This should augur well for the bond market development.
- Govt to ask regulators to allow investment mandates to expand beyond AA to A rated bonds: This will increase interest in A rated bonds, and will benefit credit opportunities funds as institutions chase yield by incorporating A rated bonds in their portfolios.
- Corporate tax rate of 25% for firms below 250 cr revenue This is 5% tax cut is a positive for many of our business owners in our universe, although the cess increase from 3% to 4% is taxing.