The Union government is likely to exempt foreign portfolio investors from an increase in taxes that was announced in the budget by Finance Minister Nirmala Sitharaman, reported news agency Reuters, citing government sources.
The report said the government would either issue a notification or an executive order, which could be later submitted in Parliament for approval, to exempt the foreign portfolio investors, mainly registered as trusts, from the increase in surcharge on super rich taxpayers.
In the Union budget 2019-20, the government decided to increase surcharge from 15 per cent to 25 per cent on taxable income between Rs 2 crore and Rs 5 crore, and from 15 per cent to 37 per cent for income above Rs 5 crore. It would also be applicable for FPIs operating as trusts or as association of persons.
The government's move was heavily criticised and over Rs 20,500 crore worth of foreign funds were pulled out from the country's stock market since July 5. Retail traders raised concern that over Rs 12 lakh crore in market cap has been eroded and that FPIs have over 50 countries apart from India to put in their investments.
FPIs pulled out Rs 2,881.10 crore from debt and equity segments on August 1 and 2. In July, they had withdrawn a net amount of Rs 2,985.88 crore from the capital markets.
Following the flight of foreign funds from the market, the government on Monday said it will soon hold discussions with representatives of foreign portfolio investors.
"I am quite open to hear them out what they (FPIs) have to say," Sitharaman said. Economic Affairs Secretary Atanu Chakraborty would hold discussions with representatives of Foreign Portfolio Investors (FPIs) soon, the finance minister added.
