Research Icon:FPIs withdraw over Rs 2,000 cr from equities in July; will proposed tax surcharge hit flows?

So far in the month of July, FIIs have pulled out more than Rs 2000 crore from equity markets while domestic institutional investors (DIIs) were net buyers for Rs 2411 crore as of 10 July 2019, data showed.

Foreign portfolio investors (FPIs) have continued to pull out money from the cash segment in July. In the first 10 days, FPIs and FIIs have withdrawn over Rs 2,000 crore.

The government's proposal to raise the tax burden on them have not helped the cause either as the selling picked up the pace soon after the proposal was made public during the Union Budget July 5.

Finance Minister Nirmala Sitharaman proposes increasing surcharges on super-rich individuals that could impact over 2,000 foreign funds which are equivalent to the association of persons (AOP), according to a media report.

The effective tax on the FPIs (being an AOP or Trust or individual), earning more than Rs 5 crore of income in a financial year, will increase from 5.98 percent to 7.12 percent (on interest income from specified bonds), 23.92 percent to 28.5 per cent (on interest income), 11.96 percent to 14.25 percent (on long term capital gains), 17.94 percent to 21.37 percent (on STT paid short term capital gains), 35.88 percent to 42.74 percent (on non-STT paid short term capital gains).

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