ICICI Bank, CBDT circular to chart stock market mood | india | Hindustan Times
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ICICI Bank, CBDT circular to chart stock market mood

When Dalal Street opens on Monday, stock movements are likely to be determined by ICICI Bank's follow-on issue and the government's new income tax directive distinguishing stocks as trading and investment assets.

india Updated: Jun 17, 2007 18:08 IST

When Dalal Street opens on Monday, stock movements are likely to be determined by ICICI Bank's follow-on issue and the government's new income tax directive distinguishing stocks as trading and investment assets.

While there are no fundamental triggers with the earnings season coming to a close, market direction could depend on how the latest circular by Central Board of Direct Taxes (CBDT) affects various players.

According to the circular issued after market closed on Friday, market players will have two sets of options -- whether to classify their holding as investment or trading and whether to put money in primary or secondary market.

An investor's portfolio can be divided into investment and trading assets, which would be considered as capital gains and business income respectively for taxation purposes.

The circular assumes even more significance as it might bring some of the FIIs, a major force behind movements in Indian markets, under tax net.

Most of the FIIs investing in India are registered in Mauritius and are exempt from capital gains tax due to the double-taxation avoidance treaty between the two countries.

However, the new CBDT circular noted that for calculating tax liability of FIIs, tax officials should verify whether the shares held in their books are valued as stock in trade or held as capital assets.

Besides FIIs, the circular might impact dealings by domestic players as well because income from trading assets is considered as business income and attract over 30 per cent of tax rates, as against short-term capital gains tax of 10 per cent and no tax on long-term capital gains.