Foreign investors return to India: FPI at 6-month high in October after govt withdraws super-rich tax

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Published: November 1, 2019 2:01:49 PM

FPI in the month of October substantially surged to Rs 16,069 crore on the back of increasing equity investments in the last two months

Foreign portfolio investors, FPI, equity investments, debt investment, hybrid investment, nirmala sitharaman, narendra modiPortfolio investments in equity were hit after the Finance Minister announced to impose a super-rich tax on FPI investors.

Foreign Portfolio Investors jolted by the government’s move to impose super-rich tax are now coming back to India in droves after Finance Minister Nirmala Sithraman rolled back the decision. The foreign portfolio investments in the month of October substantially surged to Rs 16,069 crore on the back of increasing equity investments in the last two months, according to NSDL data. Portfolio investments in equity were hit after the Finance Minister announced to impose a super-rich tax on FPI investors and a pull out of around Rs 30,000 crore was witnessed in July and August. However, after the FM announced to withdraw this decision, the equity investments started to catch the pace. 

To further boost the sentiment of FPI investors, the PMO is reportedly reviewing the tax structure on equity, in order to simplify the regime and make investments in Indian markets more attractive. The government is considering doing away with multiple taxes such as LTCG, DDT, STT, etc, and may move to a single-tax structure on equity investments, making compliance easier. 

Also Read: LTCG, Dividend Distribution Tax to go away? PMO moots rationalisation of tax on equity; Sensex soars

The PMO is also said to be reviewing current rates of Long-term Capital Gains Tax and Securities Transaction Tax. The government is considering abolishing Dividend Distribution Tax, which the domestic companies pay at the rate of 15 percent of the aggregate dividend declared, distributed or paid.

Also Read: Big relief for FPI investors; govt withdraws enhanced surcharge

To provide stimulus to the sagging Indian economy, Narendra Modi-led government is trying to leave no stone unturned. The government has already made bigger announcements like cut in corporate tax, recapitalisation of banks, and many others. However, the substantial rise in FPI investments can boost the morale of the economy. 

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