New India Tax Surcharge stuns foreign portfolio investors |
The Union budget presented by finance minister Nirmala Sitharaman proposed a new surcharge for people with annual income of more than Rs 2 crore at 3% and then for those with incomes above Rs 5 crore at 7%. Foreign Portfolio Investors registered in India under the Association of Persons are treated as individuals, and the budget announcement has left them stunned. Many FPIs in India are not registered as a company or a limited liability firm, but pay their taxes under a taxation construct called Association of Persons or AOPs. AOPs are treated as individuals in the eyes of the law, and the new surcharge applies to them. FPIs registering as AOPs and trusts are a small number out of the 5 lakh odd entities that are being treated as AOPs for taxation. SEBI data shows a little less than 10,000 registered FPIs operating in India. According to government data, the returns filing numbers for trusts that are treated as AOPs went up from 1.83 lakh in 2013-¬14 to 2.92 lakh in 2017-¬18. The number of AOP taxpayers has also gone up from 1.41 lakh to 2.24 lakh, while the number of taxpaying trusts has gone up from 2.06 lakh to 2.60 lakh.
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