(AFP file)
(AFP file)

Government to clarify on super rich tax on FPIs

  • FM Nirmala Sitharaman had proposed in her FY20 budget an increase in surcharge from 15% to 25% on the income tax outgo of taxpayers with income in the 2-5 crore range
  • The surcharge has been increased from 15% to 37% in the case of those earning more than 5 crore

New Delhi: The government is looking into the grievance of foreign portfolio investors regarding the increase in surcharge on income above 2 crore announced in the budget, Central Board of Direct Taxes (CBDT) chairman P.C. Mody said.

The chairman of the direct tax policy making body said on the sidelines of an industry conference on Monday that the issue was brought up before the government this morning.

Finance minister Nirmala Sitharaman had proposed in her FY20 budget last Friday that surcharge on the income tax outgo of taxpayers with income in the 2-5 crore range will be increased from 15% to 25%, and from 15% to 37% in the case of those earning more.

Akhilesh Ranjan, member, CBDT explained that the tax structure for individuals, Hindu Undivided Families (HUFs) and Association of Persons (AoPs) remained same. “We have been told today that some FPIs that have the structure of trusts may be assessable as AoPs. We are trying to see as to what is the actual issue there and how many may be impacted," according to Ranjan. FPIs are usually set up as corporate bodies or as partnerships but not as trusts.

The government is also working on providing further relief to startups on tax matters. Startups have been granted relief from the rigors of ‘angel tax’, one that targeted sale of shares below their fair market value—something that is genuine in the case of a startup with little physical assets, but huge business potential. However, they still face one hassle. “We have resolved one part of the issue (of startups). The only other issue is the verification of genuineness of investors and whether they have the capacity to invest. That is being addressed using technology," according to Ranjan.

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