In a major relief for capital markets which went into a severe slump after the Union Budget, the Finance Minister on Friday announced a slew of measures, including relaxation on FPI surcharge and share buybacks.
As per the Finance Minister's announcement, the 'super-rich' tax will not apply on capital gains arising from the sale of any security, including derivatives in the hands of Foreign Portfolio Investors (FPI).
"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," an official press note 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)," it added.
Further, to provide relief to listed companies which have already made a public announcement of buyback before July 5, 2019, it is provided that tax on buyback of shares in case of such companies shall not be charged.
"There are several other fiscal measures that have also been announced which all point to the government's commitment to promote business activities and enhance job creation manifold. These announcements will further boost investor confidence and start the investment cycle," said Ashishkumar Chauhan, Managing Director and Chief Executive Officer, BSE.
The domestic stock markets eroded a lot after the Budget announcements on the super-rich surcharge and the 20 per cent taxation on share buyback.
Friday's announcements had a significant impact on the stock markets as the BSE Sensex soared over 1,800 points and the Nifty50 on the National Stock Exchange (NSE) crossed the 11,000 mark.
At 1.30 p.m., the Sensex was trading at 37,941.81 points, higher by 1848.34 points, or 5.12 per cent, from the previous close of 36,093.47 points. It has so far touched an intra-day high of 38,048.93 points and a low of 36,085.74 points. The NSE Nifty50 was trading at 11,253.05, higher by 548.25 points or 5.12 per cent from its previous close.
"A very welcome move for the corporate sector in general which will help boost the investment activities in the manufacturing cycle. The immediate impact on the market is due to unexpected cuts on tax rates and a surcharge that has also triggered heavy short covering and long build-up. Short term trend is changed to bullish and we may see Nifty crossing the 11,700-mark soon lead by auto, capital goods, realty and infrastructure companies," said Romesh Tiwari, Head of Research, CapitalAim.