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Hindustan Times
3 days ago
- Business
- Hindustan Times
India's climate finance taxonomy: Green compass for Viksit Bharat
India has taken a decisive and future-ready step in its climate journey. With the release of the draft Framework for India's Climate Finance Taxonomy by the department of economic affairs under the Union ministry of finance, the country has moved to build a transparent, accountable, and investment-friendly ecosystem for green finance. This move not only fulfils finance minister Nirmala Sitharaman's Union Budget 2024 promise but also signals India's readiness to lead in defining what climate-aligned development looks like in the Global South. In a world facing cascading climate and economic shocks, this taxonomy is not just a bureaucratic tool—it is a strategic lever for systemic transformation. A climate finance taxonomy serves as a standardised classification system to help policymakers, investors, and businesses identify and support economic activities that contribute to climate goals. It brings coherence, trust, and comparability into the highly fragmented world of green finance. For a country like India--poised to become a $5 trillion economy and simultaneously facing the world's most complex climate risks—such a taxonomy is both timely and necessary. Although climate finance has expanded at an unprecedented pace in recent years—reaching $ 1.46 trillion in 2022—it remains significantly below what is required to meet global climate goals. According to one of the reports titled Global Landscape of Climate Finance, an estimated $ 7.4 trillion in annual investment is needed worldwide through 2030. Of this, at least $ 2.4 trillion must be directed to emerging markets and developing economies (EMDEs), excluding China. Notably, EMDEs are among the most vulnerable to the adverse effects of climate change, despite contributing relatively little to global greenhouse gas emissions. The document's release also aligns with long-standing global expectations that emerging economies must improve domestic enabling environments to better absorb international climate finance. India's taxonomy does exactly that--without compromising on national priorities. Designed as a living document, the Indian taxonomy is built to evolve with changing climate needs, technological innovations, and market shifts. The initial draft lays out a comprehensive approach across three key climate pillars: mitigation, adaptation, and transition of hard-to-abate sectors. From power and transport to agriculture and water security, the taxonomy identifies critical sectors for decarbonisation and climate resilience. Particularly significant is its treatment of hard-to-abate sectors such as cement, iron, and steel--often ignored in green finance discussions due to their complexity. The classification mechanism is equally forward-looking. Activities will fall under climate-supportive or transition-supportive categories, with further tiering to accommodate the realities of Indian industry and infrastructure. This allows the taxonomy to remain ambitious without being exclusionary--a fine balance that many global taxonomies fail to achieve. The strategic timing of this release cannot be overstated. As the world navigates the Baku to Belem roadmap under Brazil's COP30 presidency--tasked with delivering $1.3 trillion in annual climate finance—the onus is on developing nations to demonstrate domestic readiness. India's taxonomy sends a strong, confident message to global stakeholders: We are ready, we are credible, and we are investing in our own transformation. Moreover, India's alignment with Association of South East Asian Nations (Asean) principles in the taxonomy is both politically and economically significant. It reinforces regional cooperation while setting a new benchmark for emerging economies seeking to build their own sustainable finance pathways. Notably, as of April 2024, only 10% of developing and emerging economies had published green finance taxonomies. India's move positions it as a trailblazer, opening the door to more bilateral climate finance agreements, blended finance models, and responsible private investment. The taxonomy is not just about mobilising global capital--it's about structuring India's transition to a Viksit Bharat by 2047. It operationalises the vision of climate-smart growth, making sure that every rupee spent in the name of sustainability delivers long-term climate, social, and economic value. Through this taxonomy, India is sending a message that green finance is not a luxury--it is core to our development planning, to our food and water security, to job creation, and to building resilient infrastructure. It strengthens the Atmanirbhar Bharat agenda by enabling industries to attract climate-aligned investment and innovate towards clean technologies. In short, the taxonomy is a bridge between India's climate commitments and its economic aspirations. While the draft framework is ambitious and thoughtfully constructed, its real success will depend on implementation, governance, and stakeholder uptake. Future iterations must provide more detailed sectoral annexures, lay out performance thresholds, and develop mechanisms for transparency, reporting, and verification. Moreover, capacity-building across state governments, financial institutions, and industries will be crucial to making the taxonomy not just a compliance tool, but a strategic enabler of green growth. The public consultation process opens until June 25, 2025, is a valuable opportunity to shape a more inclusive, effective taxonomy that works for all stakeholders—from large corporates to grassroots entrepreneurs. India's draft climate finance taxonomy marks a pivotal shift in our climate narrative. It offers a roadmap that's not only aligned with the Paris Agreement but deeply rooted in Indian realities. In a world divided by climate finance promises and delivery gaps, India is showing what domestic leadership looks like. This is what leadership for a Viksit Bharat looks like: Bold, thoughtful, and grounded in both science and sovereignty. This article is authored by Kirit P Solanki, former MP, Lok Sabha and Pradeep Singhvi, executive director, Energy and Climate Practice, Grant Thornton Bharat LLP.
Time of India
24-05-2025
- Business
- Time of India
Mamata skips Niti meet to protest Centre's ‘withholding of Bengal's dues'
Kolkata: Bengal CM Mamata Banerjee and state finance minister Chandrima Bhattacharya skipped the 10th governing council meeting of Niti Aayog in Delhi on Saturday "as a mark of protest against the deprivation of Bengal", Trinamool said. Tired of too many ads? go ad free now Former Bengal finance minister Amit Mitra, now a special adviser to the CM on finance, was also absent. He had previously represented Bengal at such meetings. TMC spokesperson Kunal Ghosh, pointing to "the central govt's withholding of funds owed to Bengal", said the dues had been kept pending for the past couple of years. The PM "speaks about working in unison but when it comes to Bengal, Centre does not provide the dues", he added. Ghosh was speaking at a presser at Trinamool Bhavan. The CM had written "innumerable letters to the PM for the release of funds", Ghosh said, adding that "it is time to release Bengal's dues", which stood at over Rs 1.7 lakh crore. Highlighting the "central govt's neglect towards Bengal" as one of the reasons for Banerjee's absence at the Niti meet, Ghosh said: "The PM talks about working together with all states… taxes are collected from Bengal but the state's dues for 100-days' work are not released." He said the Bengal CM had provided Rs 37,000 crore to 5.9 million job card holders entirely from the state's coffers. "The central govt hasn't released funds for 1.2 million housing units, which Mamata Banerjee is also funding from Bengal's exchequer," he said. Last July, CM Banerjee had staged a walkout from the Niti meeting, alleging she was "humiliated" and that her "microphone was disconnected" after she slammed Union Budget 2024 about five minutes into her address. Tired of too many ads? go ad free now The CM had said that even after being allowed to speak for 5 minutes, "there was a constant ringing sound, asking me to stop midway, and I had to stop". It stirred a nationwide anti-BJP issue, which was supported by other opposition leaders. Meanwhile, state minister for social welfare, industries and commerce and women and child welfare, Shashi Panja, demanded that Centre clear Bengal's dues immediately. "BJP should say why Bengal is deprived. They have no contribution to the development of Bengal. They are always neglecting Bengal and insulting Bengal. BJP MLAs are not even present during assembly sessions; they only boycott discussions. From Awas Yojana to rural roads, all funds have been blocked by Centre, and the state is now funding the housing scheme. " Panja also targeted Centre over the lack of security for tourists in Pahalgam even as she branded BJP for promoting hate politics. "BJP should stop spreading fake narratives," she said.
New Indian Express
15-05-2025
- Business
- New Indian Express
Key changes in ITR 5 form for assessment year 2025-26
Income Tax Return (ITR)-5 for the Assessment Year 2025-26 has undergone significant changes to align with the legislative changes introduced in the Union Budget 2024-25. Capital Gain Schedule: The Union Budget amended Section 2(42A) changing the period of holding of a capital asset for it to be classified as short term capital asset. Earlier, there were different categories of assets for which the holding period of not more than 12/24/36 months was prescribed for the same to be classified as short term capital asset. W.e.f. 23rd July 2024, only 12 and 24 months have been prescribed. As a result, for units listed in a recognised stock exchange the period of holding has been reduced from 36 months to 12 months and for other assets not specifically covered, the period of holding has been reduced from 36 months to 24 months. The updated ITR - 5 contains an updated capital gains schedule to enable the taxpayers to split their gains before and after 23rd July 2024 and calculate the tax accordingly. Capital Loss on share buyback: The Union Budget 2024 inserted a new proviso to Section 46A to provide that when a consideration for buyback is chargeable as dividend under Section 2(22)(f), the consideration for the purpose of this section shall be deemed NIL. Thus, capital losses on share buybacks will be allowed if corresponding deemed dividend is reported under 'Income from other sources'. This change is applicable from 01.10.2024.
Time of India
05-05-2025
- Business
- Time of India
Favourable change in taxation, regulatory push for Fund of Funds: Should you invest in FoFs now?
Favourable tax nudge Live Events Exploring new horizons Limited utility A mini-revolution is unfolding in the fund of funds (FoF) arena. Currently a space only sparsely inhabited by investors and AMCs, it may soon catch the fancy of more. FoFs invest in one or multiple mutual fund (MF) schemes rather than buying securities directly. The underlying investments for an FoF are the units of other MF schemes either from the same MF or other MF by a favourable shift in the tax regime, FoFs are being seen in a new light. Mutual funds are increasingly introducing more products in this avatar. Moreover, Sebi has introduced a fresh framework for FoFs, enabling their classification into distinct categories and opening the door to innovations. But do FoFs really offer a compelling proposition, distinct from existing plain-vanilla funds? Are any of the offerings worth exploring?For long, FoFs were treated as tax outliers in the mutual fund space. They were classified as 'non-equity funds' for tax purposes, regardless of the underlying asset class. Only FoFs investing over 90% in domestic equities were taxed on par with equity funds . Until 2023, gains on any FoF got taxed at 20% after indexation, if sold after three years. This created a disadvantage for certain FoFs compared to their plain-vanilla counterparts. For instance, FoFs investing in domestic equities and international equities were taxed as non-equity funds, even as mainstream funds investing in the same assets enjoyed favourable, lower LTCG taxation as equity the Budget 2023 removed LTCG benefits for non-equity funds, FoFs became even less attractive. Gains from all non-equity schemes, including FoFs, started getting taxed at the investor's slab rate. The July 2024 Budget breathed new life into FoFs. These now benefit from a uniform 12.5% LTCG tax if held for over 24 months, making them more tax-efficient. Under the updated Section 50AA, only funds with 65% or more in debt instruments are now classified as 'Specified mutual funds' and taxed at slab rates, regardless of holding period. FoFs, whether investing in domestic equities, bonds, commodities, international assets or a mix of assets, no longer get clubbed into this Bala, Head of Research, says, 'FoFs earlier lost out on taxation, but can now stand on an equal footing with other mutual fund offerings.' Manish Goel, Founder and MD, Equentis Wealth Advisory Services asserts, 'The Union Budget 2024 offered a new lease of life to FoFs.' This change levels the playing field, boosting the case for FoFs as a taxefficient diversification tool, adds a tax-friendly regime buoying investor interest, fund houses are exploring the FoF route for differentiated offerings. Currently, there are 94 FoFs, managing assets of `97,260 crore. Most of these are domestic feeder funds investing in a single underlying ETF. Fund houses typically launch an FoF variant for their ETFs, to enable investors to invest in these ETFs even without a demat account. Investors are assured of liquidity in FoFs, as the investments happen through mutual fund houses, not via exchanges. Among these are 53 overseas FoFs (in the form of feeder funds), managing assets totalling Rs.25,030 crore. These either invest in an overseas mutual fund or an international index. Only 39 multi-scheme FoFs—those investing in two or more schemes—are currently available. Most are asset allocator or multi-asset funds, combining exposures to equity, bonds, gold, and more. The Rs.24,412 crore ICICI Prudential Asset Allocator FoF is the largest in this category. Of these, around 18 are multimanager FoFs that also invest in schemes from other fund houses. The biggest among them is the Rs.1,272 crore Franklin India Dynamic Asset Allocation FoF. Clearly, the universe of multi-scheme FoFs has limited could change soon, aided by the tax shift and regulatory blessings. Many AMCs are bringing in innovative offerings in this space. For instance, mutual funds are actively turning to the FoF space in search of alternatives for debt funds. AMCs are now combining fixed income with arbitrage within the FoF framework. Even as gains from a traditional debt fund are taxed at the investor's slab rate, the FoF alternative will incur 12.5% tax on gains after two years. This presents sizeable tax savings for those in the higher tax brackets. Seven existing debt funds have been repackaged as income-plus-arbitrage schemes. Multiple new schemes are being launched seems keen to open up the FoF space further. The regulator dictates the categories of schemes that can be launched by a fund company. AMCs need to classify schemes into distinct buckets, lending a clear identity to each scheme, with a tightly defined investible universe of securities. Among these, mutual funds are also permitted to offer FoFs under 'other schemes' category. However, rules currently don't specify what funds can be offered under this umbrella. The target investment universe for these funds is also not defined. To enable more structured growth in this space, Sebi has introduced a classification framework for FoFs holding two or more all FoFs were taxed as nonequity funds, leaving them at a disadvantage to plain-vanilla this framework, AMCs can launch multi-scheme FoFs across six broad categories (see graphic), some of which include sub-categories. For example, within domestic equity-oriented FoFs, AMCs may offer two diversified FoFs (any mix of market caps) and multiple thematic or sectoral FoFs. In the hybrid FoF category, one fund each is permitted under aggressive hybrid, conservative hybrid, income-plus-arbitrage, dynamic asset allocation, and multi-asset allocation believe the move will bring muchneeded clarity to the FoF space. Rushabh Desai, Founder, Rupee with Rushabh Investment Services, says the scheme categorisation and capping will help streamline this universe. 'The FoF space was at risk of going haywire, with any number of schemes, with any permutation and combination getting launched.' The framework also opens up new possibilities for distinct solutions. Nirav Karkera, Head of Research, Fisdom, says, 'This is a developing space. The canvas is blank right now; innovation can happen in any corner.' Goel remarks, 'The framework allows fund houses greater design freedom—enabling hybrid combinations of domestic and global funds, active and passive styles, and multi-thematic allocations under a single product.'Investors may finally see a wider choice of true multi-manager FoFs, with a single fund investing across multiple schemes. Bala asserts, 'With multi-manager FoFs, the asset management company also becomes a portfolio adviser to the investor, managing a basket of funds rather than the investor picking and managing on his/her own.' When investing on their own, investors incur costs while rebalancing between individual schemes. With multi-scheme FoFs, there is no capital gains tax when the primary fund rebalances internally between two or more funds. Goel says, 'For investors, this means access to well-constructed, diversified portfolios with lower operational overhead. For the industry, it marks a shift from cookiecutter funds to next-generation offerings tailored to evolving investor appetites.'All FoFs must be classified into categories, and number of offerings expanding FoF universe may seem appealing, but as seen in the broader mutual fund space, more variety often leads to clutter and confusion. Joshi notes that plainvanilla funds are enough for most investor goals. 'There are enough options in traditional MFs. Investors don't need to chase every new product or category,' he are mostly investing across multiple asset FoFs also come with drawbacks. Unlike direct investing, they offer limited control over the selection of underlying schemes. Karkera remarks, 'In an FoF, you have to live with the fund choices of the asset manager, taking the good along with the bad.' Even if you prefer having fund selection taken off your hands, there is no assurance the mutual fund will do a better job of choosing funds. Desai says, 'The FoF investing in multiple funds needs to be managed really well if it is to take up the onus of portfolio construction for you.' Karkera observes, 'Complexities in fund selection are distinct from individual security selection. Most fund houses have not built enough capabilities to evaluate other asset managers' funds.'Investors must also contend with higher costs. Goel asserts, 'The dual expense structure—at both FoF and underlying fund levels—can eat into returns, especially in actively managed products.' However, some ideas may be worth exploring. For those seeking international exposure, overseas FoFs may offer differentiated solutions in a tax-friendly avatar, without navigating foreign investment complexities, says Goel. Overseas indices or themes not available in India are worthy options. HDFC Developed World Indices FoF, DSP Global Innovation FoF and ICICI Prudential Global Advantage Fund are examples. Goel also favours multiasset FoFs for moderate-risk investors seeking balanced returns. ICICI Prudential Asset Allocator FoF, HDFC Asset Allocator FoF, Kotak Multi Asset Allocator FoF and Franklin India Dynamic Asset Allocation Fund of Fund are some prominent names. Meanwhile, investors may avoid sectoral or thematic FoFs. 'Bundling multiple sectors is like a diversified fund and defeats the purpose of focused sectoral bets,' says Bala. Income-plus-arbitrage FoFs can be tax-efficient alternatives to regular debt funds, but come with a distinct risk-return few schemes operate as true multi-manager FoF.s
