New Delhi, Jul 11 (IANS): Aiming to assuage the discontent shown by equity market participants on the latest proposal to levy a surcharge on high-income individuals, Central Board of Direct Taxes Chairman P.C. Mody on Wednesday said the proposal was not intended towards the Foreign Portfolio Investors (FPI).
At an industry event here, he clarified that taxation base rate was not changed but it was just the surcharge which has been changed and it affected the FPIs of AIF category-III.
"The consideration was that the people who have the higher ability to pay and shell out more for the cause of nation building and those were the people (with income) between Rs 2-5 crore and above... that is why there is the difference in surcharge.
"The base rate was not changed, it was just the surcharge which was changed.. as a collateral damage if you can call it, it affected the FPIs of AIF category-III... There again the option is to go to the corporate structure. I don't see any kind of differential treatment. Basically the increase in surcharge was just to allow some benefit for the lower end...," Mody said at a CII event.
The Budget last Friday raised surcharge on the super-rich. Accordingly, those with an annual income of between Rs 2 crore and Rs 5 crore would be levied a surcharge of 25 per cent from 15 per cent previously. For those earning Rs 5 crore or more annually, the surcharge has been increased from 15 per cent to 37 per cent. With this, the effective tax rate will go up to 39 per cent for those in the Rs 2-5 crore income slab and 42.74 per cent for for those in Rs 5 crore and above group.
Most FPIs earn more than Rs 5 crore in a year and hence would come under the highest income tax bracket. They generally route their investments through trusts and body of individuals in the country's capital markets.
Commenting on the overall budget 2019-20, Mody said: "This is a very distinctive Union Budget, laying down very clear policy direction and road map for the new India we envisage, heading towards a $5 trillion economy. Ease of tax compliance, both at the policy and process levels, shall promote ease of living, which has been distinctively addressed in the Budget."