FM Sitharaman's Budget 2019 proposal to increase surcharge on the rich spooked the market at the start of the current week triggering a sell-off as fears over its applicability on foreign portfolio investors (FPIs) structured as trusts. BSE's Sensex lost 2 percent on Monday as the Finance Ministry continued to not provide clarity on the them.

Addressing this concern, earlier on Tuesday, Sitharaman in press conference addressing the customary post-budget board meeting of Reserve Bank of India in New Delhi said, "I don't think clarification at the moment is all that required. Let's see as it goes. You think it is required? Will take it as it come."

On Wednesday, however, Central Board of Direct Taxes (CBDT) chairman PC Mody said, that FPIs registered as trusts or associations of persons (AoP) can consider converting to corporate entities in order to avoid paying the "collateral damage" of additional surcharges proposed in the budget.

In the Budget 2019, it was proposed to hike surcharge on individuals, Hindu Undivided Family (HUF) and AoPs having taxable incomes of between Rs 2 and Rs 5 crore to 25 percent (from 15 percent) and to 37 percent (from 15 percent) on earnings over Rs 5 crore. It wasn't clearly specified if this would include FPIs and alternative investment funds that are registered as non-corporate entities with the market regulator.