CBDT says reports on different new rules for FPIs, domestic investors 'incorrect'
BusinessToday.In August 28, 2019
The Central Board of Direct Taxes (CBDT) on Wednesday cleared the air surrounding reports of the government creating different new rules for foreign portfolio investors and domestic investors. The CBDT said a section of media was creating an "incorrect perception" that the Centre, after Finance Minister Nirmala Sitharaman's announcements of structural measures last Friday, created two different regimes between manage FPIs and domestic investors. It said a different regime for FPIs, under section 11D of the Income Tax Act, 1961, already existed.
These differential regimes existed even prior to the 2019 Union Budget, and hence it's not the creation of finance ministry's last Friday announcements, said the CBDT statement. It said the Income Tax Act, 1961, contained special provisions under section 115AD for taxation on foreign institutional investors' income from derivatives. "Under this regime, income of FPIs arising from derivatives was already treated as capital gains and liable for special rate of tax as per section 115AD of the Act. However, income arising from derivatives for the domestic investors, including alternative investment funds (AIFs) category-III as well as foreign investors who are not FPIs, has already been treated as business income and not as capital gains, and hence taxed at applicable normal income tax rates," said the statement.
Finance Minister Nirmala Sitharaman last Friday revoked higher surcharge on the income tax outgo for FPIs and domestic investors, reversing the decision taken in Union Budget 2019. Sitharaman also announced exemption of startups from 'angel tax', a package to address distress in the auto sector and upfront infusion of Rs 70,000 crore to public sector banks, to boost economic growth from a five-year low. Several other measures announced by the finance minister included speedy GST refunds, faceless assessments, no angel tax for start-ups registered with DPIIT and simplification of GST systems.
Edited by Manoj Sharma