No 'misuse' of double tax

THE clampdown on the ''misuse'' of double taxation avoidance treaties spelt out in the common minimum programme rattled a section of players on Thursday. However, a clarification by senior Congress leaders late in the evening that it was aimed at any misuse by resident Indians and not foreign institutional investors helped calm fears. Double-tax avoidance treaties signed with 60 countries like Mauritius, Spain and others, serves the purpose of providing protection to tax payers against double taxation. "We understand that the statement is directed towards resident Indians misusing double taxation," a head of equities at a leading foreign brokerage said.
Meanwhile, the overall reaction to the CMP was neutral. A section of funds believe that money may flow out of India over the next few weeks. A fund manager at a leading US-based fund said that the CMP does not throw up any major surprises.

"We are now concerned about the action on the ground. As expected, many populist measures are included. However, there is no clarity on how resources will be mobilised to meet the funding requirement," the fund manager added.
American depository receipts and India-dedicated listed funds on US markets witnessed a flat to positive trend.
At 9.00 pm IST, the Infosys ADS rose 0.5% at $84.16 while Wipro rose 1% at $ 44.95. ICICI Bank ADS rose 0.5% at $13.15 while HDFC Bank ADS gained 1.4% at $28.35.
The two India-dedicated funds, India Investment Fund (IIF) managed by Morgan Stanley and India Fund (IFN) managed by Oppenheimer, gained ground.
The IIF fund rose 0.5% at $21.43 while IFN gained 1.5% at $22.34.
Foreign brokerages have already advised caution on India with Merrill Lynch Asia Pacific strategist Spencer White downgrading India and advised funds to cut their exposure.
"The change in government leaves the reform process, fiscal and monetary situation in question. Valuations are not compelling enough given the outlook for the risk premium and India remains a consensus overweight amongst international investors. It is time to cut exposure to India and wait to see what the new government does," Mr White said in a recent note.