India not to tax capital inflows to bourses like Brazil

India today ruled out taxing capital inflows to the stock market on the lines of Brazil and said markets have been functioning normally.

“No Sir,” Finance Minister Pranab Mukherjee said in a written reply in the Lok Sabha to a query by Congress member Manish Tewari whether the government has any proposals to tax capital inflows to the stock market just as Brazil has done.

Brazil has recently imposed a two per cent tax on foreign purchases of fixed income securities and equities. The Finance Minister said, “the market mechanisms have sufficient resilience and have been functioning normally.”

Mukherjee said inflows through Mauritius contributed 18.74 per cent of total 79,343 crore foreign institutional investors (FIIs) inflows to the Indian equity markets during the first eight months of this fiscal.

However, Singapore constituted (-) 2.5 per cent of the total FIIs inflows during the period, he said. It implies that there were more selling from Singapore route than purchases in the Indian stock markets.

Mukherjee said for granting certificate as an FII, Securities and Securities and Exchange Board of India (SEBI) takes into account an applicant’s track record, professional competence, financial soundness, experience, general reputation of fairness and integrity and existence for a period of at least five years.

Sebi also takes into account whether the entity is regulated/registered by an appropriate foreign regulatory authority, he said.