FPIs Ask Government To Rollback Higher Surcharge, Long-Term Capital Gains Tax

Foreign portfolio investors requested the finance ministry to exempt them from the higher surcharge proposed in the Budget.

In the meeting with Finance Minister Nirmala Sitharaman, FPIs pointed out that the proposed surcharge has led to “tremendous” flight of capital from the markets, Nandita Parker, managing partner at Karma Capital Management LLC, told BloombergQuint.

The Budget proposed to raise surcharge on individuals earning Rs 2-5 crore and above also included foreign portfolio investors and alternative investment funds as these are registered as non-corporate entities. This spooked investors and triggered a selloff in the market. FPIs have pulled out about Rs 12,418 crore from the equity market in July, according to data available on the National Securities Depository Ltd.’s website.

Besides rollback of the new levy, foreign investors also sought removal of long-term capital gains tax and suggested levying only securities transaction tax which is simpler and predictable, Parker said after the meeting.

Long-term capital gains tax was reintroduced—thirteen years after it was abolished—in February 2018 on gains made on the sale of listed equity shares.

FPIs also sought easier registration for them, and extending the exemption from withholding tax on masala bonds. The government had exempted withholding tax on rupee denominated bonds from Sept. 17, 2018 to March 31, 2019.

FPIs who attended today’s meeting included Vijay Kamani of Goldman Sachs, Pallav Kumar of Deutsche Bank, Roger Exwood of Blackrock, Bharat Iyer of JP Morgan, Ashwini Kapila of Barclays Bank, among others.