Giving in to the demands of overseas investors, Finance Minister Nirmala Sitharaman on Friday announced a rollback of enhanced surcharge on foreign portfolio investors levied in the Budget. Surcharge on long and short term capital gains arising from the transfer of equity shares has been withdrawn, she said. "The pre-Budget position is restored," the minister said. It is being done to encourage investment in the capital market, the finance minister said.
The decision taken in the Budget to levy enhanced surcharge had spooked the stock markets. Following the increase in surcharge in the Budget, the effective income tax rate for individuals with a taxable income of Rs 2-5 crore went up to 39 percent from 35.88 percent and for those above Rs 5 crore to 42.7 percent. Earlier this month, capital market participants and foreign institutional investors presented a charter of demands to Sitharaman. These demands included a rollback of surcharge on FPIs and review of dividend distribution tax.
Sitharaman further said that to mitigate genuine difficulties of startups and their investors, it has been decided to withdraw angel tax provisions for them. A dedicated cell under a member of CBDT too will be set up for addressing the problems of startups, she said. Her statement in a climate of economic slowdown seen in the Indian economy. These announcements were made to boost Indian investment.
Earlier in her address, Sitharaman announced a centralised system for Income Tax issues, notices, etc. She elaborated that from October 1, 2019, onwards, a centralised system would issue the notices to the tax assessees. Boosting wealth creators, she said that the system will generate unique identification numbers (DIN) to track issues and notices. Sitharaman made this statement in a climate of economic slowdown seen in the Indian economy.
Sources have reported that India's economic slowdown led to Moody's reducing India's growth forecast by 0.4 % in GDP for the next fiscal year (FY 21). Sources have said that slow growth in the economy was allegedly triggered after some announcements in Finance Minister Nirmala Sitharaman's maiden Budget speech. The surcharge levied on foreign investors has allegedly led to an exodus of investors from Indian markets, as per sources. Recent trends have also seen a collapse in stock exchange points due to the slowing economy particularly in automobile, FMCG, construction, MSME sectors.