Collection of super-rich cess from foreign portfolio investors (FPIs) might account for only a percent of the total estimated collection of Rs 12,000 crore, Business Line reports. “We expect to earn about Rs 400 crore from the cess,” a Finance Ministry official told the publication.
Around 40 percent of FPIs are likely to be impacted by higher cess since they have a non-corporate structure and operate as trusts.
Moneycontrol could not independently verify the story.
During the Budget presentation, Finance Minister Nirmala Sitharaman announced an increase in the surcharge on tax for individuals earning above Rs 2 crore a year.
The proposal has already spooked foreign investors and lead to an outflow of foreign funds.
FPIs pulled out a net Rs 3,758 crore from the Indian capital markets during July 1-26, reversing the trend of the previous five months were they were net investors.
The government has suggested that FPIs should restructure themselves as corporates to avoid the higher surcharge.
The issue of the Double Taxation Avoidance Agreement (DTAA) is being examined and the details will be mentioned in the rules, the article quotes an official as saying.
The official also dismissed fears of FPIs pulling out capital. Given the earning opportunities in India, he feels FPIs will not only continue investing but will also increase their holdings.
News Source : Moneycontrol