No clarification over FPI surcharge needed at present: Sitharaman
Nirmala Sitharaman. (File Photo: IANS)
Nirmala Sitharaman. (File Photo: IANS)

No clarification over FPI surcharge needed at present: Sitharaman

(Syndicated story. Not edited by The Quint.)
New Delhi, July 8 (IANS) Fiance Minister Nirmala Sitharaman on Monday said there is no need of any clarification at the moment on the additional tax burden that could apply to foreign portfolio investors (FPI), due to higher surcharges on the super-rich individuals introduced by her budget last week.
"I do not think any clarification at this moment is all that required," she said at a press conference after the RBI Central Board meeting here where RBI Governor Shaktikanta Das was also present.
Sitharaman was asked about the market witnessing sell-offs by the FPIs who are rushing to profit booking as the fear of tax sets in.
Central Board of Direct Taxes Chairman Pramod Chandra Mody, earlier in the day, said the board was examining FPIs' concern on tax surcharge and would issue a clarification on the issue soon.
FPIs rushed to book profits after it was interpreted by them that they stand to pay higher taxes due to the surcharge on income tax on high net-worth individuals.
The government on Friday raised income tax surcharge on people with an annual income of more than Rs 2 crore ($291,248.00).
There were concerns that the increased surcharge on super-rich could also affect foreign funds investing in India since a same tax structures apply for individuals, HUFs and Associations of Persons (AOPs).
Some FPIs follow the trust structure and hence would be classified as AOPs. Many FPIs in India are structured either as trusts or AOP and would be affected by the new surcharges.
Industry estimates suggest that at least 1,500 to 2,000 actively trading FPIs will come under the purview of the new tax proposals and will have to pay between 35.8 per cent to 42.7 per cent a year. Effective tax on funds, earning more than Rs 5 crore of income in a year and structured as AOPs or trusts, will increase from 35.8 per cent to 42.7 per cent. The rate will increase from 35.8 per cent to 39 per cent if the fund makes an income between Rs 2 crore and Rs 5 crore in a year.
"The matter has been brought to our notice now. We will issue a clarification soon," the CBDT chief said at an Assocham event.
Sitharaman, in the 2019-20 Budget tabled in Parliament last week, proposed to increase surcharge from 15 per cent to 25 per cent on taxable income between Rs 2-5 crore, and from 15 per cent to 37 per cent for income above Rs 5 crore.
Following the increase in surcharge, the effective income tax rate for individuals with taxable income of Rs 2-5 crore will go up from 35.88 per cent to 39 per cent, and for those above Rs 5 crore, it would go up to 42.7 per cent.
According to traders, the Union Budget proposal on higher tax incidence for foreign portfolio investors and high networth individuals also continued to spook domestic investors.
Investors' wealth on Monday got depleted by Rs 3.39 lakh crore after the Sensex plummeted 793 points. The other proposals in the Budget to increase the minimum public shareholding levels to 35 per cent was a dampener and, along with a 20 per cent tax on share buybacks, equal contributors to the sell-offs.
--IANS
ana/sn/vd

(This story was auto-published from a syndicated feed. No part of the story has been edited by The Quint.)

(This story was auto-published from a syndicated feed. No part of the story has been edited by The Quint.)

Follow our Hot News section for more stories.

    Loading...