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FM Nirmala Sitharaman rules out clarity on FPI surcharge

Finance minister Nirmala Sitharaman has ruled out an immediate clarification on the proposed increased super rich surcharge being applicable to foreign portfolio investors.

Fears over applicability of the proposed higher tax on foreign portfolio investors structured as trusts spooked the stock markets on Monday, shaving 793 points, or 2%, off the benchmark index Sensex.

“I don’t think clarification at the moment is all that required. Let’s see as it goes. You think it is required? Will take it as it comes,” she said at a press conference after addressing the customary post-budget board meeting of Reserve Bank of India in the capital.

Asked if the government would clarify on the issue, the minister said she would respond in Parliament. “I don’t want to sound like a stickler for rules, but this is an answer that I’d rather give in the Parliament.” The minister’s statement came hours after Central Board of Direct Taxes chairman PC Mody said at an Assocham conference that the government will issue a clarification soon. “The matter has been brought to our notice now. We will issue a clarification soon,” Mody said earlier in the day.

There are concerns that foreign portfolio investors that have set up trusts to invest in India could be classified as an Association of Persons, a category covered by the proposed increased surcharge.

Following the increase in surcharge, the effective income tax rate for individuals with taxable income of Rs 2-5 crore will go up to 39% from 35.88% and for those above Rs 5 crore to 42.7%.

According to reports, about 2,000 FPIs operate as trusts. CBDT chief Mody said the board is collecting facts on the matter.

On moving the regulation of housing finance companies to the Reserve Bank of India, the finance minister said the government is of the view that the central bank is better equipped to handle HFCs.

Quotable quotes from Nirmala's maiden Budget

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An allocation to quotes

8 Jul, 2019
Finance Ministers have a tradition of sprinkling their Budget speeches with memorable quotes and historical anecdotes. Nirmala Sitharaman did not deviate from this during her two-hour, 143-clause speech on Friday, and belted out many a quote and couplet to stress her points of focus and the underlying theme of her Budget. Here are a few of them
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