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Last Updated : Aug 23, 2019 10:07 PM IST | Source:

FM Nirmala Sitharaman withdraws tax surcharge on FPIs, domestic investors

In her maiden Budget proposal, the Finance Minister had proposed to impose a higher tax surcharge on the super-rich.

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Giving a major relief to market participants, the Finance Minister Nirmala Sitharaman on August 23 announced the abolition of tax surcharge on foreign portfolio investors (FPIs) as well as domestic investors.

"In order to encourage investment in capital market, it is decided to withdraw enhance surcharge on FPIs. Surcharge on domestic investors in equity also goes. Pre-budget position is restored," said Nirmala Sitharaman, addressing the media in New Delhi.

"It will be applicable to this fiscal year. The approximate revenue implication for the FPIs and domestic investors will be around Rs 1,400 crore," Revenue Secretary Ajay Bhushan Pandey said.


The Finance Minister's announcement was on expected lines and analysts are confident that this will provide the market with a much-needed boost.

"The announcement was on expected lines. It is slightly better than what the market expected," said Pankaj Pandey, Head of Research at ICICI Securities.

Rusmik Oza, Head of Fundamental Research at Kotak Securities also thinks the move is a positive one for the market and it can check the outflow of foreign fund.

"Withdrawal of enhanced surcharge on FPI is a big positive for Indian markets as it could reverse the outflows seen since post-Budget," he said.

Jairaj Purandare, Chairman, JMP Advisors terms it as a welcome announcement which will bring the much awaited relief for FPIs, and in turn, provide a boost to the equity markets.

One of the most important and sensitive announcements of Budget 2019-20 was the increased surcharge for individuals and association of persons (‘AOPs’), etc. at 25 percent for incomes in the range of Rs 2 crore to Rs 5 crore and at 37 percent for incomes exceeding Rs 5 crore. Since several Foreign Portfolio Investors (‘FPIs’) are structured as trusts which are taxed as AOPs, the increased surcharge was, intentionally or unintentionally, made applicable to FPIs.

A fresh wave of foreign capital outflow engulfed the market after the Budget. As per data available with NSDL, FPIs offloaded Rs 12,419 crore in equities in July and Rs 12,105 crore in August so far.

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First Published on Aug 23, 2019 05:52 pm
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