First and foremost, it has to be remembered that as far as NRIs are concerned, various tax deductions and facilities applicable to Residents are equally applicable to the NRIs’ Indian income.
Some specific steps directly applicable to the NRI community are:
- Sec. 115JB has been amended so as to provide that Minimum Alternate Tax (MAT) shall not be applicable to a foreign company, if the foreign company does not have a permanent establishment under relevant DTAA or a place of business in India.
- Sec. 206AA has been amended so as to provide that TDS shall not be deducted at a higher rate in the case of non-residents not having PAN, subject to prescribed condition.
- The determination of residency of foreign company on the basis of Place of Effective Management is deferred by one year.
- DTAA benefits have been extended by allowing for rate in force being applicable for withholding tax purposes in respect of distribution by Category-I and II Alternate Investment Funds to NRIs.
- To protect the interest of NRIs it has now been provided that any gains arising on account of appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of an Indian company subscribed by an NRI shall be exempt from capital gains tax.
- FDI related policies have been significantly revamped—
Foreign investment will be allowed in the insurance and pension sectors in the automatic route up to 49% subject to the extant guidelines on Indian management and control to be verified by the Regulators.
100% FDI in Asset Reconstruction Companies (ARCs) will be permitted through automatic route. Foreign Portfolio Investors will be allowed up to 100% of each tranche in securities receipts issued by ARCs subject to sectoral caps.
- Investment limit for foreign entities in Indian stock exchanges will be enhanced from 5 to 15% on par with domestic institutions. The existing 24% limit for investment by FPIs in Central Public Sector Enterprises, other than Banks, listed in stock exchanges, will be increased to 49% to obviate the need for prior approval for increasing the FPI investment.
- With a view to promote Make in India and following the practices in advanced countries, foreign investors will be accorded Residency Status subject to certain conditions. Currently, these investors are granted business visa only up to 5 years at a time.
- To facilitate setting up of international financial services centre in India, the following tax benefits are offered to companies located in the centre:-
- Dividend distribution tax is not applicable
- Minimum Alternate Tax shall be charged @9%.
- The transaction in foreign currency of sale of equity share or units of equity oriented funds or units of a business trust taking place on a recognised stock exchange established in international financial services centre shall not be liable to STT.
- The transaction in foreign currency of sale of commodity derivatives taking place on a recognised association established in the centre shall not be liable to CTT.
- While the equity market is well developed, it has been a constant grievance of NRI investors that the bond market in India is just isn’t deep enough. Some measures to strengthen and enhance the same are that the investment basket of foreign portfolio investors will be expanded to include unlisted debt securities and pass through securities issued by securitisation SPVs.
- For developing an enabling eco system for the private placement market in corporate bonds, an electronic auction platform will be introduced by SEBI for primary debt offer.
- A complete information repository for corporate bonds, covering both primary and secondary market segments will be developed jointly by RBI and SEBI.
- The deduction of interest payable on capital borrowed for acquisition or construction of a self-occupied house property shall be allowed if such acquisition or construction is completed within 5 years in place of the present limit of 3 years. 13. Rounding off, for investors interested in investing in India remotely, the conditions of special taxation regime for off shore funds u/s 9A have been amended so as to provide that a fund registered or set up in a country notified by the Central Government will also be eligible for the said regime.
So as one can see, various measures have been and are being undertaken to make India more investor friendly not only for NRIs but for global investors. Watch this space for updates.
(The authors may be contacted at firstname.lastname@example.org)