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Govt Likely to Roll Back Surcharge on FPIs: Sources

Govt Likely to Roll Back Surcharge on FPIs: Sources

Finance Minister Nirmala Sitharaman had said this week that the government will soon hold discussions with representatives of foreign portfolio investors, amid continuing overseas fund outflow from the markets.

New Delhi: The government is likely to roll back the recently imposed higher tax on foreign portfolio investors, sources told CNBC-TV18 on Thursday, around a week after FPI’s pulled out Rs 2,881.10 crore from debt and equity segments.

In her Budget speech this year, Finance Minister Nirmala Sitharaman had said that the government had decided to increase surcharge from 15 per cent to 25 per cent on taxable income between Rs 2 crore and Rs 5 crore, and from 15 per cent to 37 per cent for income above Rs 5 crore. It would also be applicable for FPIs operating as trusts or as association of persons.

Sitharaman had said this week that the government will soon hold discussions with representatives of foreign portfolio investors, amid continuing overseas fund outflow from the markets. "I am quite open to hear them out what they (FPIs) have to say," she had added.

However, the FPIs continue to be on a selling spree ever since the budget was announced.

Retail traders complain that over Rs 12 lakh crore in market cap has been eroded and that FPIs have over 50 countries apart from India to put in their investments.

Nonetheless, stock markets participants fear that once implemented, this move may adversely impact FPIs which are set up as non-corporate vehicles. Typically, FPIs are set up as trusts or limited partnerships in their home jurisdictions.

The definition of a partnership firm under Indian tax law refers to the Indian Partnership Act, which does not recognise foreign partnerships or limited partnerships.

While the rationale behind such an increase in surcharge is to levy a higher surcharge only on high net worth individuals (HNIs) to garner more revenues in tax falling scenario, it has sent jitters among FPIs, and partially triggered the subsequent crash in the stock market.


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