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Under Income Tax Act, 1961, the income of FPIs arising from derivatives was treated as capital gains and liable for special rate of tax as per section 115AD of the Act, the CBDT clarified
Picture for representational purpose The government on Wednesday said that the rollback of enhanced surcharge on foreign portfolio investors (FPIs) and domestic investors, announced last
week as part of a series of measures to boost the economy, has not created a differential regime between the two types of investors. “Differential regime between domestic investors
(including AIF category III) and FPIs existed even prior to the 2019 Budget and was, therefore, not the creation of the Finance (No 2) Act, 2019 or the announcement made by the Finance
Ministry on last Friday,” Central Board of Direct Taxes (CBDT) said in a statement. Finance minister Nirmala Sitharaman on Friday announced the withdrawal of enhanced surcharge on
short-term and long-term capital gains earned by FPIs and domestic investors. Under Income Tax Act, 1961, the income of FPIs arising from derivatives was treated as capital gains and liable
for special rate of tax as per section 115AD of the Act, the CBDT clarified. However, income arising from derivatives for the domestic investors, including Alternative Investment Funds
category-III as well as for foreign investors who are not FPIs, has always been treated as business income and not as capital gains, and taxed at applicable normal income tax rates, it said.
