 "Finance Minister Arun Jaitley along with his budget team leave from North Block to meet President before presenting the Union Budget 2016-17, in New Delhi")
The government has announced easing of norms governing asset reconstruction companies (ARCs) to ensure easier capital infusion.
Finance Minister Arun Jaitley has proposed to amend Securities and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 to allow sponsors to hold 100 per cent equity in the ARCs. Non-institutional investors will be allowed to invest 100 per cent in security receipts, making it easier for the ARCs to raise funds. At present, the sponsors’ stake is capped at 49 per cent and the rest has to be held by an individual, restricting capital inflow.
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Apart from this, in order to get more investment in ARCs, the government has proposed to allow complete pass-through of income-tax to securitisation trusts, including trusts of ARCs. As a result, this income will be taxed in the hands of the investors, which are mainly banks. However, the trusts will be liable to deduct tax at source. As of now, there has been confusion over who pays the tax on the interest income from recoveries.
The government has also decided to allow 100 per cent Foreign Direct Investment (FDI) in ARCs via the automatic route. Till now, FDI up to 49 per cent was allowed this way.
