It’s Not the Govt’s Intent to Hit FPIs: Sitharaman
Finance minister Nirmala Sitharaman said the surcharge levied on high-income earners in the budget had not been intended to hurt foreign portfolio investors (FPI) structured as trusts. Sitharaman also told ET in an interview that the government was keeping a close watch on the economy and struggling sectors such as automobiles as she pitched for a “significant” reduction in interest rates. There is no rethink about overseas borrowings and the tax targets in the budget are achievable, she said. “No, to be honest, I don’t think it was an intent to or we didn’t aim to touch the FPIs,” she said about the surcharge levied on those earning over Rs.2 crore. Sitharaman promised to hear out investors that will need to convert themselves into companies from a trust structure to avoid the surcharge. “If this issue of conversion is becoming tedious, the conversion is not tax-neutral, I am quite willing to hear them out.” But she sounded a note of caution about privileging overseas investors. “Once you start rethinking, it becomes a dialogue of what is the level of a rethink. Are you looking at, you know, yielding only to the FPIs? Then what happens to the domestic investors?” she said.
“So, I will leave it at that for now.” The government increased the surcharge to 25% from 15% on those with a taxable income of Rs.2-5 crore and to 37% from 15% for income above ?5 crores. This increased surcharge on individuals, Hindu Undivided Families, trusts and association of persons — which impacts foreign portfolio investors, sovereign wealth funds and alternative investment funds — has been cited as one of the key dampeners of market sentiment. About 40% of FPIs are liable to the surcharge. The Sensex has declined over 4% since the July 5 budget. Sitharaman said she was not worried about the reduction in growth estimates, adding that the slowdown was global and India was still expected to grow at 7% or more. “I wouldn’t say (I’m) worried. Of course, I will be closely watching the developments and making sure that timely responses are made from the government side — not knee-jerk, but considered,” she said.
The Economic Times, 29th July 2019
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