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Indian Government Announces Tax Exemptions For Foreign Investors

Updated on Aug 26, 2019
tax surcharge eliminated for NRIs

The Indian Finance Minister, Nirmala Sitharaman announced the withdrawal of higher surcharge levied on Foreign Portfolio Investment (FPI) with an intention to boost economic growth and encourage foreign investments in India.

"In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by Finance (No. 2) Act, 2019 on long and short term capital gains arising from transfer of equity shares/units referred to in section 111A and 112A respectively,” Sitharaman said. Amidst a global economic slowdown, even before the formal announcement on NRI Taxes , expectations that she would announce a rollback of the super-rich tax and other measures to boost the economy pulled the Indian stock market back up from a losing streak.

FPI Monitor

Source: NSDL FPI Monitor  

 

Analysis of FPI investment Data

Not an investor? No problem! We take pride in making finance simple, especially sending money online. Read on to know more about Foreign Portfolio Investments (FPI).   Foreign Portfolio Investment (FPI) is the classification of investment made by non-residents in Indian securities. The investors are collectively known as Foreign Portfolio Investors .   Recently Foreign Portfolio Investors became the unintended target in a bid to increase in surcharge on the super-rich by the Finance Ministry. Owing to this change announced in the interim Union Budget 2019, there was an increase of about 3% and 7% on the effective tax rates for those with an annual earning of above 2 Crore Rupees and 5 Crore Rupees respectively.  As a result, foreigner investors withdrew more than $3 billion from the Indian stock market.  

How does FPI impact the economy?

Like in the example above, when FPI increases, the stock market goes up and vice-versa. Although the impact of FPI is highly debated, FPI analysis helps you sense the stock market sentiments. Simply put, an increase in FPI indicates a bullish market and a decrease indicates a bearish market. So, if you are planning on investing or want to keep yourself informed, we recommend tracking the FPI movement. You can use the NSDL website to see the consolidated data from NSE and SEBI.

Team Modi vs. Team Moody?

The announcement comes as Moody’s Investors Service released a report lowering India’s GDP growth forecast for the current year to 6.2% from 6.8% citing a combination of factors. Addressing the report, the Finance Minister asserted that India’s GDP expansion is much higher than the estimated global GDP growth that is currently at 3.2 percent.

On behalf of the Modi government, Sitharaman also added that reform is a continuous process and it will continue to remain their top priority while reiterating the fact that India is placed in a better position than many developed countries including the US and Germany.

Regardless, this move is likely to reverse the outflows and the markets will see an increase in remittance. We have compared the top money transfer companies to find the best exchange rates to send money to India from the following countries below:

Other Announcements made by Indian Finance Minister affecting the economy:

  • United States of America: USD to INR rates today
  • United Kingdom: GBP to INR rates today
  • Canada: CAD to INR rates today
  • Australia: AUD to INR rates today.
  • Rupees 70,000 Crore worth of equity will be infused into the public-sector banks
  • Rupees 20,000 Crore worth of lending support to housing finance companies by the National Housing Bank (NHB)
  • Exemption of angel tax provisions for those startups that are registered with the Department for Promotion of Industry and Internal Trade
  • Pending GST refunds for Micro, Small and Medium Enterprises will be paid within 30 days
  • Corporate Social Responsibility (CSR) violation will be treated as a civil offense, and not a criminal offense.
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