FPI surcharge rollback will apply to F&O trades as well

NEW DELHI: Finance NSE 0.15 % Minister Nirmala Sitharaman’s decision to roll back enhanced surcharge on long-term and short-term capital gains will apply to incomes from derivative trades as well

Sitharaman on Friday removed the surcharge on incomes arising from the transfer of equity shares, units of equity oriented-mutual funds and units of business trusts. 

While gains from trading in futures and options (F&O) segment are usually treated as business income, for foreign portfolio investors, they have considered capital gains because derivative exposure taken by these investors are considered as capital assets. 

Friday’s announcement meant tax payable on gains arising from the transfer of these instruments will be also be exempted from the levy of the enhanced surcharge. 

“It is decided that the tax payable on gains arising from the transfer of derivatives (future and options) by FPIs, which are liable to a special rate of tax under Section 115AD, shall also be exempted from the levy of the enhanced surcharge," the government said in a release 

The surcharge, meanwhile, will still be applicable on capital gains from debt instruments and other income such as interest, noted Jairaj Purandare, Chairman, JMP Advisors. 

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