With the Taxation Laws (Amendment) Ordinance, 2019, being promulgated on Friday, the increase in surcharge, often referred to as the “super-rich tax", stands withdrawn for all domestic and foreign investors, as far as income from listed equity shares is concerned.
However, the increase in surcharge will continue for income from salary, profession or rent above ₹2 crore.
The Finance Act (2) of 2019 had raised the surcharge on income tax from 15% to 25% for income of ₹2-5 crore and from 15% to 37% for those earning more.
In effect, a person earning between ₹2 crore and ₹5 crore was to pay 39% tax (called the highest marginal tax rate for that person) on income exceeding ₹2 crore.
A person earning more than ₹5 crore was to pay 42.74% on the income exceeding ₹5 crore.
The amendment to the Income-Tax (I-T) Act announced is effective 2019-20.
An official statement, issued after the announcement by finance minister Nirmala Sitharaman, said the move was aimed at stabilizing “the flow of funds into the capital market".
The statement added that the increase in surcharge announced in the budget shall not apply on capital gains arising on the sale of listed equity shares in the hands of individuals, Hindu undivided families, associations of persons, body of individuals and juridical entities.
The relief is also applicable on gains made on the sale of units of equity-oriented funds and business trusts on which securities transaction tax has been paid.
Investors cheered the government’s move, with the benchmark BSE Sensex clocking its biggest single-day gain since 18 May 2008.
The Sensex surged 2,284.55 points, or 6.3%, to touch the day’s high of 38,378.02 points, before ending at 38,014.62 points, gaining 1,921.15 points, or 5.32%, over the previous day’s close.