Govt set to remove I-T surcharge on FPIs, may withdraw LTCG too

NEW DELHI: The government is likely to announce a slew of market-friendly changes including withdrawing of surcharge on income of foreign portfolio investors (FPIs), removing of long-term capital gains (LTCG) tax after a holding period of three years and easing of dividend distribution (DDT) tax, ET NOW reported on Thursday, quoting government sources.

The report pushed the BSE Sensex 634 points higher and helped the NSE Nifty top 11,000-mark at the close.

The Centre may keep surcharge on the super rich intact, sources said.

“The government may withdraw higher surcharge for FPIs via notification or ordinance,” the report added.

In the case of the government opting for ordinance, Parliament nod will be taken in the next session.

The decision was taken by the finance ministry after a meeting with Prime Minister Office.

“Revenue forgone due to removal of higher surcharge will be only Rs 400 crore,” the report said.

The decision on FPIs is expected after Law Ministry whets the proposal, sources told ET NOW.

Another report by ET Now suggested that the Finanace Ministry is working on confidence booster package for the capital markets including a relook at long-term capital gains tax (LTCG).

The Finance Ministry is studying the impact of withdrawing LTCG after a three-year holding period, ET NOW reported quoting sources as saying. LTCG was introduced in Budget 2018.


Earlier, the government had proposed to increase surcharge on super rich in Budget presented by Finance Minister Nirmala Sitharaman.

However, this surcharge also increased the tax burden on FPIs as most are organised as non-corporate entities such as trusts and association where taxation is similar as for individuals.

As a result, the benchmark equity indices has witnessed severe selling pressure since July.

Market capitalization of the BSE-listed firms tanked from Rs 151.35 lakh crore on the Budget day to Rs 138.82 lakh crore on August 7, wiping out Rs 12.53 lakh crore.

A large part of the selling can be attributed to foreign institutional investors (FIIs). The FPIs have also been net sellers of over Rs 20,000 crore worth of stocks in the capital market segment on the BSE, NSE and MSEI since July 1, according to PTI.

The benchmark BSE Sensex rallied over 700 points after the news report, while the 50-share Nifty index reclaimed the 11,000-mark.