Skip to main content

FPIs may Rush to Stock Up to Avail Treaty Tax Benefits

By
Taxman not to question FPIs for bringing money via Mauritius, Singapore till March 31
India-focused offshore funds are asking clients to advance their planned investments into them before April 1 -the deadline for foreign portfolio investors to avail treaty tax benefits. From the new financial year, foreign investors using countries such as Mauritius and Singapore to route their investments into India will have to start paying capital gains, though at a reduced rate for the time being. Also, the tax department will not question investors for bringing money through this route till March 31.
“Foreign investors may upfront their planned purchase of Indian stocks to before March 31 to take advantage of the grandfathering window so they don't have to pay any extra capital gains tax,“ said Samir Arora, fund manager, Helios Capital.
Last year, India amended its tax treaty with Mauritius and Singapore, from where close to 80% of foreign portfolio money flows into the country . The amended treaty says that FPI investments in India held before April 2017 can still avail t re at y b e n e f i t s, wh i ch t h e y c a l l `Grandfathering'. This means FPIs holding stocks before April 2017 will not be subject to any tax or even scrutiny under the General Anti Avoidance Rule (GAAR), a rule which gives the taxman power to question foreign investors on their investments into the country .
The rule has prompted hedge funds and exchange traded funds (ETFs) which invest in India to push investors to use this window to bring in money . “Grandfathering ensures that investments before April 2017 are not scrutinised under GAAR and investors will try to take advantage of this,“ said Suresh Swamy , partner, PwC.
Most of these offshore funds have seen a sharp slowdown in inflows due to uncertainty about the impact of demonetisation on economic growth and a general aversion to emerging markets.
Foreign portfolio investors have dumped shares worth almost `30,000 crore since October. Though the selling has slowed down and the market has seen modest inflows so far in 2017, it is nowhere close to the interest that Indian stocks saw in the last few years. “I can easily imagine a scenario where both domestic and foreign investors become buyers together,“ said Arora.
A large number of investors coming via Mauritius and Singapore also invest via various structures including the off-shore derivative instruments like participatory notes. According to experts, it is some of these investors who are concerned over GAAR.
Economic Times New Delhi,13th Febuary 2017

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Healthy balance sheets augur well for economy: RBI Governor Sanjay Malhotra

By
  Large tariffs by the United States administration and elevated geopolitical risk have increased near-term global financial stability risks, and along with weather events pose downside risks to domestic growth, Reserve Bank of India(RBI) Governor Sanjay Malhotra said in the foreword to the Financial Stability Report released today.Noting that domestic growth momentum is buoyed by strong domestic drivers, sound macroeconomic fundamentals and prudent policies, Malhotra said: “External spillovers and weather-related events could pose downside risks to growth.”On the other hand, he said the outlook for inflation is benign, and there is greater confidence in the durable alignment of inflation with the Reserve Bank’s target.Commenting that the structural shifts reshaping the global economy are making policy intervention challenging, the Governor emphasised the need for central banks and financial sector regulators to remain vigilant, prudent and agile in safeguarding their economies and...
Post a Comment
Read more