India’s budget sinks tax clarity expectations

Author: Ashley Lee | Published: 18 Jul 2014
Prime Minister Modi's first budget avoids radical changes
Last week’s budget announcement was considered the first test of Narendra Modi’s reform agenda. While it wasn’t as bold as expected, market participants hope the changes were enough new foreign investors’ interest in India.

The budget was expected to clarify the Modi administration’s views on retrospective taxation, the unpopular General Anti-Avoidance Rules (Gaar), and capital market products such as depositary receipts and real-estate investment trusts (Reits).

It acknowledged most of these issues, but its response was less dramatic than some had hoped.

The budget did not make radical changes, said Latham & Watkins partner Rajiv Gupta. "It’s still early days for the new government, and they probably didn’t want to introduce radical changes that may have a disruptive impact," he said.

Instead, he believes that they are taking incremental steps to lay the foundation for next year, when...