Since early days of economic liberalisation, foreign institutional investors (FIIs) have always been an important class of investors in the Indian capital markets. Over the years, India has seen heightened investment activity, which has contributed to the growth and vibrancy of capital markets. Given its importance, among other things, India has a specific concessional tax regime for FIIs (which has been in place since 1993). Under the regime, the income earned by FIIs from transactions in Indian securities is classified as capital gains and subjected to lower tax rates. Capital gains earned by FIIs are not subject to withholding taxes in India. Interest income earned by FIIs from government securities or specified corporate debt securities is taxed at rates that are currently as low as five percent. However, there are grey areas in the tax laws that have emerged in the recent past and hence the need to provide FIIs with tax certainty. Two specific areas on which FIIs need tax ce