The increase to 42.7% from 35.9% in the tax rate on annual earnings over 50 million rupees ($730,000), announced in the first annual budget after Prime Minister Narendra Modi’s reelection, has a more vocal victim: overseas funds investing in India.
India is killing off the one industry that can bring badly behaving tycoons into line while nudging savers away from an unproductive lust for gold. That industry is domestic hedge funds, which have taken seven years to reach $6 billion in investment commitments from nothing. By contrast, equity investment in India by overseas financial investors is upward of $400 billion.
Even that measly $6 billion figure for so-called Category 3 Alternative Investment Funds overstates the industry’s development. Some managers of vanilla mutual funds now seek the AiF registration to avoid regulatory restrictions on what they can pay distributors for selling to mom-and-pop investors. Alternatives that are meant for the rich don’t have such restraints. But leave aside the pretenders. Rather than encourage a community of investment vigilantes who target firms falsifying accounts or stealing from investors, the Indian taxman is threatening to disband it.
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The increase to 42.7% from 35.9% in the tax rate on annual earnings over 50 million rupees ($730,000), announced in the first annual budget after Prime Minister Narendra Modi’s reelection, has a more vocal victim: overseas funds investing in India. These are seeing red. Often structured as trusts or associations, they too will have to pay the higher levy that applies on all non-corporate income. The head of the tax authority in New Delhi has told them they’re “collateral damage.”
Source: Financial Express
