In a move to boost investor sentiment and stimulate the sagging economy, the government has announced a roll-back the increase in surcharge on capital gains tax arising due to the sale of equity shares and units of equity oriented mutual funds for individuals and Hindu Undivided Families (HUFs). The amendment in the Income Tax Act on this will come into effect from 2019-20.
While announcing this, Minister of Finance Nirmala Sitharaman said, “In order to stabilise the flow of funds into the capital market, it is provided that enhanced surcharge introduced by the Finance (No.2) Act, 2019 shall not apply on capital gains arising on sale of equity share in a company or a unit of an equity oriented fund or a unit of a business trust liable for securities transaction tax, in the hands of an individual, HUF, AOP, BOI and AJP.”
With this, the enhanced surcharge, which was popularly known as the ‘super rich tax’ would be rolled back from all domestic and foreign investors for income from listed equity shares.
The Finance Act (2) of 2019 had raised the surcharge on income tax from 15% to 25% for incomes between Rs. 2-5 crore, and from 15% to 37% for those earning more.
The statement also said the enhanced surcharge shall also not apply to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs).