Finance Minister Nirmala Sitharaman today announced the rollback of the enhanced surcharge levied on long- and short-term gains arising from transfer of equity and shares to boost economic growth from a five-year low.
Other Fineprint
A few experts are waiting for the notification fineprint before fully applauding the move. Bhavin Shah, leader of financial services tax at PwC India, pointed out that the section determining FPI taxation was not explicitly mention by the minister in her announcements.
Finance minister’s presentation suggested amendment in respect of capital gains taxable under Sections 111A and 112A. FPIs are however taxable under a different section 115AD. Hope the fineprint makes amendment in correct section.Bhavin Shah, Partner & Leader, FS Tax, PwC India
“The removal of higher surcharge on capital gains will not apply to Alternate Investment Funds (AIFs) where the characterisation of income is business income,” Shah added.
Vaibhav Sanghvi, co-chief executive officer at Avendus Capital, echoed that. “We have seen that the surcharge is out from the capital gains perspective and not from all category III AIFs”. Sanghvi is referring to the business income of funds - that will continue to bear the additional surcharge.
“So all the long-short funds and all the hedge funds would still be charged at a higher surcharge,” he added
Glass Half Full
Market veteran Ajay Bagga expressed how for a revenue of Rs 1,400 crore (on account of this surcharge on equity capital gains) the government had allowed for an erosion of Rs 17 lakh crore in market capitalisation.
“It’s sentimentally very good somebody has finally understood the gains were very little and losses for the nation were too huge,” he said, adding there remains hope. “There is hope for more decisions to come through... I look at the glass as half full.”
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