Govt may give ordinance relief to overseas investors

The Centre is weighing an option to take the ordinance route to give succour to frightened overseas investors who made a historic run from India since July 5, wiping off over Rs 12 lakh crore from the BSE Sensex after an apparent Budget oversight treated them on a par with the super-rich and imposed a surcharge.

Top government sources told DH that an ordinance may be brought in to amend a particular provision of the Finance Act, 2019, which concerns the foreign portfolio investors (FPI). The other Union Budget provisions related to surcharge on super-rich will remain.

When Finance Minister Nirmala Sitharaman proposed to raise the surcharge on super-rich in her Budget on July 5, it impacted individuals, Hindu Undivided Families (HUFs), trusts and associations of persons (AoPs). A large number of FPIs in India are structured as AoPs.

Meanwhile, the government is also looking at whether Indian income tax rules can be invoked on overseas investors, allowing them to claim exemption from such a surcharge or get a refund after they have paid the surcharge.

However, any relief under the Income Tax Act can only be temporary in nature and till the time the Finance Act is not amended. With the current Parliament session coming to a close this week, the government will have to take recourse to the promulgation of an ordinance to amend the Finance Act.

The Act needs to be amended if the government wants to bring in any change in income or corporate tax. However, if there is a provision in the Act to grant exemption, the government can take recourse to that.

The same rule does not apply to changes in customs duty and goods and services tax, which can be altered through a notification.

Officials from the finance ministry, prime minister’s Economic Advisory Council, Niti Aayog and Securities and Exchange Board of India (Sebi) have already held several rounds of meetings with top officials from the Prime Minister’s Office, the last being over the weekend.

Sebi has been asked to see if investors registered with the regulator can get some immediate relief.

The government has brought such an ordinance to amend the Finance Act even in the past. In September 2003, the Centre promulgated the Taxation Laws (Amendment) Ordinance to amend certain provisions of the Income Tax Act, the Wealth Tax Act and the Expenditure Tax Act.