No relief for Foreign Portfolio Investors unless they turn corporates

Foreign Portfolio Investors (FPI) can register themselves as companies to avoid the super-rich tax surcharge imposed in this year’s budget.

Published: 19th July 2019 07:56 AM  |   Last Updated: 19th July 2019 07:56 AM   |  A+A-

Finance Minister Nirmala Sitharaman (Photo | PTI)

By Express News Service

NEW DELHI:  Foreign Portfolio Investors (FPI) can register themselves as companies to avoid the super-rich tax surcharge imposed in this year’s budget.

FPIs that function as trusts in India will have to pay the tax surcharge proposed, said Finance Minister Nirmala Sitharaman on Thursday. She added that FPIs may consider the option of structuring as companies and FPIs functioning as trusts may consider being registered as companies.

The Finance Minister, in her Budget presented earlier this month, slapped an effective Tax Surcharge of 3 per cent for individuals with an annual income of between Rs 2 crore and Rs 5 crore, and 7 per cent for those earning more than Rs 5 crore. The additional taxes apply to individuals and groups of individuals who are an Association of Persons (AoP) or a body of individuals.  The tax surcharge and realisation that it could apply to FPIs sent shock waves through bourses and saw stocks plunging last week.

“The decision not to make any changes in the tax surcharge for FPIs is disappointing and may lead to loss of some business on the bourses and redeployment elsewhere,” said Amit Bannerjee, an independent merchant banker specialising in East Asian Funds.

According to depositories data, overseas investors withdrew a net sum of Rs 4,953.77 crore from equities during July 1-12, but poured in a net Rs 8,504.78 crore into the debt market, translating into a cumulative net investment of Rs 3,551.01 crore.

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