The Interests of the HNI segment can be worked upon through concentration on AIFs (alternate investment fund). It is desirable to increase the momentum in the AIF segment by removing certain tax anomalies. All income accrued from AIF should be given the pass through treatment, irrespective of the head of income for improving the ease of doing business. There is a debate on whether income earned on divestment of securities should be classified as business income or capital gains. The matter remains on complicated grounds owing to amendments made by Finance Act, 2015 which omits pass through treatment for business income. An amendment needs to be made to sec 2 (14) of the ITA to specify income earned on divestments of securities by AIF as capital gains. The government needs to distribute tax on dividends paid by companies as it is construed as double taxation on profits.
The government needs to work on more industry friendly reforms. The goal of affordable housing is a commendable initiative on by the government but least has been done to make it available to the public. A strong demand momentum needs to be generated in the housing sector through innovative schemes or making available cheaper loans. For example, free land or fiscal incentives need to be announced especially in Tier II and Tier III cities for supplementing the number of housing stocks by stirring up the private sector to propel the demand. The potential of public-private participation model needs to be uncorked in the affordable housing sector as it will increase stock of housing units with larger macro-economic benefits.
Public Spending and Rural Economy:
The government needs to pay more attention to the irrigation and agriculture as many problems in the rural economy have set feet due the brunt of two consecutive droughts. The government needs to walk the talk on reviving the sagging demand sentiment in the rural areas, through increased public spending and focussed social programs. An investment strategy and fiscal incentives or even a grand campaign like the start-up India initiative needs to be formulated to drive the rural economy, which will in turn boost rural sector demand.
(The author is Managing Director and CEO, IndoStar Capital Finance Ltd. )