The provision, generally known as Section (t) exempted trading profits from dealing treasury securities.rn
rnThough trading profits is actually the small spread between buy and sell quotes, some tax experts have argued that it applied to all interest income from treasuries.rn
rnThe government is expected to take away this ambiguity and apply the effect retrospectively.rn
rnQuoted banks are liable to tax at 30 percent and primary dealers at 35 percent.rn
rnBanks and Primary dealers have made huge capital gains as interest rates fell rapidly in the past 18 months making banks an primary dealers an obvious target.rn
rnBut whether the government will tax capital gains on treasuries is not yet clear. At the moment capital gains on shares are also exempt.
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rnThe government is also taking away exemptions of FCBU income of banks and limiting input credit to a maximum of ten per cent in other efforts to reduce revenue slippage.rnrnrn
Primary dealers are expecting the government to close a loophole in a disputed tax law on income from treasury instruments.