CBDT issues clarification on perceived differential taxation of FPIs and domestic investors

CBDT issues clarification on perceived differential taxation of FPIs and domestic investors

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

New Delhi, 28th August, 2019

PRESS RELEASE

CBDT issues clarification on perceived differential taxation of FPIs and domestic investors It has come to the notice of the Central Board of Direct Taxes (CBDT) that an incorrect perception was being created in a section of the media inasmuch as if the announcements made by the Hon’ble Finance Minister on last Friday, which brought in a number of responsive structural measures to boost up the economy, had created a differential regime between FPIs and domestic investors including AIF category III.

Dispelling this false impression being created in certain sections of the media including social media, it is clarified that 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 Minister on last Friday.

In this regard, it is further stated, that, in case of Foreign Institutional Investors (FPIs), Income Tax Act, 1961 (the ‘Act’) contains special provisions [section 115AD read with section 2(14) of the Act] for taxation of income from derivatives. Under this regime, 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. However income arising from derivatives for the domestic investors including Alternative Investment Funds (AIFs) 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. The differential regime therefore already existed for FPIs through Section 115 AD. Therefore to say, that this year’s budget or FM‘s announcement of last Friday created a differential regime between FPIs and domestic investors is incorrect.

(Surabhi Ahluwalia)
Commissioner of Income Tax
(Media & Technical Policy)
Official Spokesperson, CBDT.

• Non-deduction of TDS does not make transaction as unexplained in the hands of deductee – ITAT
• Last date to submit MEF 2026-27 extended to 09.09.2026
• Validity of demand u/s 156 for default u/s 115-O, if assessment order u/s 143(3) has Nil demand
• Issue already examined and adjudicated by CIT(Appeals), can’t be reopened on same set of facts
• TDS can’t be denied for non deposit of tax deducted by the deductor – High Court

addition u/s 68 addition u/s 69A ca misconduct cash deposit in bank cbdt circular CBDT Instruction cbdt notification cbdt order cbdt press release cgst circular cgst notification cit revision 263 concealment penalty condonation of delay covid-19 custom circular demonetisation due date extension e-way bill faq GST circular GST Council Meeting gst faq gstn advisory GSTR-3B GST rates IBBI ibc icai announcement income tax penalty itat ITAT Delhi mca circular MCA notification penalty 271(1)(c) penalty u/s 271(1)(c) Press Release reasons recorded reopening 148 Reopening us 147 Search & Seizure sebi circular unexplained cash credits validity of notice u/s 148 Withdrawal of 2000 500 Bank Notes