New Delhi, Sep 19 (IANS): In a major relief for foreign portfolio investors, the Union Government has proposed to cap the surcharge on dividend income from FPIs with a trust structure at 15 per cent.

Currently, FPIs that operate as trusts have to pay a surcharge as high as 37 per cent if their dividend income is over Rs 5 crore and 25 per cent in case of a dividend income of Rs 2 crore and Rs 5 crore, following measures in the 2019-20 budget.

The government was at the receiving end of criticism from several quarters due to the existing the surcharge structure put in place in the FY20 budget.

"The Finance Act, 2020 is also proposed to be amended to clarify regarding capping of surcharge at 15 per cent on dividend income of the Foreign Portfolio Investor," said the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020 tabled in the Parliament.

The government has also proposed tax exemption on the income of category-III Alternate Investment Funds in the International Financial Services Centre from masala bonds, derivatives or overseas investments.

The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020 provides for extension of various time limits for completion or compliance of actions under the specified Acts and reduction in interest, waiver of penalty and prosecution for delay in payment of certain taxes or levies during the specified period.