Foreign portfolio investors (FPI) on Friday pressed for complete rollback of the higher super-rich surcharge proposed in the Budget. They also sought relief in matters related to long-term capital gains (LTCG) and dividend distribution tax (DDT), beside easier KYC norms.

These demands were made at a meeting called by Finance Minister Nirmala Sitharaman as part of a series of interactions to seek stakeholders’ views before finalising a detailed action plan to boost the economy.

Present at the meeting here were Goldman Sachs’ India Co-Head Vijay Kamani, Nomura Country Head Vipul Mehta, Standard Chartered MD Amit Padhye, Barclays MD Ashwini Kapila and Deutche Bank Director Pallav Kumar.

The meeting generated a lot of excitement in the stock market. The BSE Sensex jumped 255 points on Friday on the expectation of measures from the Centre to revive economic growth and address tax concerns.

Call for tweaks

“The FM heard all the views which include a complete rollback of higher super-rich surcharge on FPIs,” one of the attendees told reporters. Another said that some representatives wanted at least a tweaking of norms. The Minister, however, gave them no assurance that the government will accede to their demands.

The higher tax has dampened sentiments in the equity markets. Investors took out more than ₹12,400 crore in July from the market. Till date in August, they have taken out more than ₹11,135 crore.

Budget 2019-20 prescribed a higher surcharge on persons earning more than ₹2 crore. Since this higher surcharge covers individuals, Hindu undivided families and associations of persons, domestic or foreign, there is a fear that tax on the sale of equity will rise to 21.3 per cent from 18 per cent for short-term capital gains, and to over 14 per cent from 12 per cent for LTCG. The higher incidence of taxation is likely to affect nearly 40 per cent of FPIs operating in India under a non-corporate structure and, more specifically, as trusts.

Relief options

Meanwhile, sources said the government is mulling giving FPIs some relief, of which one is to issue a circular under the existing law. Another option is to amend the Finance Bill, 2019, which has become an Act; but this will take time. Finance Ministry officials said a final view will be taken after a detailed consultation.

LTCG was re-introduced in Budget 2018 after a gap of 14 years. It is levied at 10 per cent for all listed equity shares on gains above ₹1 lakh made on or after April 1, 2018.

Dividends paid by a domestic company are subject to DDT at 15 per cent of the aggregate dividend declared, distributed or paid.

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