No relief from super-rich tax for FPIs structured as trusts: Sitharaman

Finance Minister Nirmala Sitharaman
Foreign portfolio investors (FPI) functioning as trusts in India will have to pay the tax surcharge proposed in Budget, said Finance Minister Nirmala Sitharaman on Thursday.

FPIs may consider the option of structuring as companies and FPIs functioning as trusts may consider being registered as companies, said Sitharaman in Parliament.

Sitharaman, in her Budget speech on July 5, proposed a tax increase of 3 per cent for individuals with an annual income of between Rs 2 crore and Rs 5 crore, and 7 per cent for those earning more than Rs 5 crore.

The additional taxes apply to individuals, and groups of individuals who are an Association of Persons (AoP) or a body of individuals. It takes the tax rate of someone earning Rs 2 crore up to 39 per cent, and for those earning more than Rs 5 crore the rate climbs to at least 42.7 per cent.

The realisation that the new tax likely applies to the trusts through which many foreign investors put money into Indian financial markets sent stocks plunging last week.

(With inputs from Reuters)