Nirmala Sitharaman digs in heels, says FPIs can’t escape tax net; suggests this way out

By: |
Published: July 18, 2019 6:05:04 PM

Snapping hopes of a tweak in surcharge Finance Minister Nirmala Sitharaman on Thursday said that higher surcharges proposed in budget that could apply to foreign portfolio investors (FPIs) would not be dropped.

The FPIs registered as trusts will have to pay new tax surcharge, she added.

Snapping hopes of a tweak in surcharge Finance Minister Nirmala Sitharaman on Thursday said that higher surcharges proposed in budget that could apply to foreign portfolio investors (FPIs) would not be dropped. Instead, the FPIs registered as trusts may consider the option of structuring as companies in India to avoid a new tax surcharge, she said while giving a reply in Lok Sabha today. The FPIs registered as trusts will have to pay new tax surcharge, she added.

In the budget presented last week, the finance minister had proposed raise in the surcharge to 25 per cent, from 15 per cent on taxable income between Rs 2 crore and Rs 5 crore, and to 37 per cent, from 15 per cent, for income above Rs 5 crore. The FPIs will also have to pay higher taxes on long-term capital gains and short–term capital gains as well.

After the announcement about higher surcharges was made in the budget, the stock markets crashed due to a sell off led by FPIs, who now may have to pay higher tax on their income due to the new rules.

Also read: ADB cuts India GDP growth forecast to 7 per cent for FY20; fastest growing major economy tag remains

The Finance Bill 2019 proposal covers all taxpayers other than firms and partnership firms and once implemented, the decision may adversely impact FPIs that are set up as non-corporate vehicles.

Adding, the finance minister said that the direct tax amendments through Finance Act seeks to promote Modi government’s ‘Make in India’ mission by reducing the tax rates for 99 per cent of the companies.

Do you know What is Repo Linked Lending Rate (RLLR), Wholesale Price Index (WPI), Public Debt, Finance Commission Grants & Other Transfers, Economic Survey? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.