The foreign institutional investors have sold shares worth Rs 688 crore in six sessions after the Union Government in Budget proposed a higher surcharge on super-rich impacting most foreign portfolio investors (FPI) adversely, data compiled by NSDL showed.

Since the Union Budget was announced on July 5, FPIs have on net basis sold shares worth Rs 688 crore. The Budget proposed to raise surcharge on the super-rich. Those with an annual income of between Rs 2 crore and Rs 5 crore would be levied a surcharge of 25 per cent from 15 per cent previously.

For those earning Rs 5 crore or more annually, the surcharge has been increased from 15 per cent to 37 per cent. With this, the effective tax rate will go up to 39 per cent for those in the Rs 2-5 crore income slab and 42.74 per cent for for those in Rs 5 crore and above group.

Most FPIs earn more than Rs 5 crore in a year and hence would come under the highest income tax bracket. They generally route their investments through trusts and body of individuals in the country's capital markets.

Meanwhile, foreign investors are urging government to reconsider its decision to increase taxes on the super-rich, including a higher levy on certain groups of portfolio investors, arguing the move will hit the competitiveness of Indian capital markets.

Asset Managers Roundtable of India (AMRI), a lobby group of FPIs, said the higher tax could affect many large foreign mutual funds and pension funds, and hit India's reputation as a stable tax jurisdiction.

"This will certainly impact the competitiveness of the Indian capital markets," AMRI's President Nandita Agarwal Parker said in a letter to India's finance minister this week.

(With agency inputs)