Skip to main content

Capital gains tax relief for foreign origin funds

By
Capital gains tax relief for foreign origin funds 
Income from sale of securities in India by funds based abroad will be exempt from capital gains tax, the government announced.This exemption will be given only when the India focused fund is also charged to tax in India.The Central Board of Direct Taxes (CBDT) said the tax provision on indirect transfer would not apply to this type of income at private equity and venture capital funds.

This, say experts, ought to reassure those investing in India through a multilayered structure.The issue was a concern among foreign portfolio investors (FPIs).The Finance Act of 2012 had amended section 9 of the Income Tax Act to address the ruling given by the Supreme Court in favour of Vodafone.

Accordingly, gains through indirect transfers were made subject to capital gains tax. The condition being that the Indian assets should exceed Rs 10 crore and represent at least half the value of all assets held by the foreign investor.

Investors holding less than five per cent of the share capital or voting power of the company were exempt from this. The wording was such that a multilayered structure (followed by PE funds, venture funds, pension funds) could be subject to multiple levy, despite taxes having already been paid in India by the foreign institutional investor.

On December 21 last year, CBDT issued a circular that offshore vehicles, including FPIs, were subject to indirect transfer provisions.The move had set alarm bells ringing in fund houses from Hong Kong to London to New York.Accordingly, CBDT had put the matter in abeyance the next month.
TAX RELIEF
Tax exemption will be given only when the India focused fund is also charged to tax in India
CBDT said the tax provision on indirect transfer would not apply to this type of income at PE and VC funds
The issue was a concern among foreign portfolio investors
On December 21 last year, CBDT issuedacircular that offshore vehicles, including FPIs, were subject to indirect transfer provisions
The move had set alarm bells ringing in fund houses from Hong Kong to New York

The Business Standard, New Delhi, 09th November 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

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more