New Delhi : Fearing a rise in their business costs, some foreign portfolio investors have knocked on the doors of markets regulator Sebi and Finance Ministry for greater clarity on taxation rules for indirect transfer of securities, especially after revision to treaties with key jurisdictions like Mauritius, Cyprus and Singapore.
The foreign funds, who have pumped in billions of dollars into Indian capital markets over years, have been on a heavy selling spree in recent months, including in bonds segment, amid an overall weakness in the domestic markets and adverse global cues.
The investors are, however, hopeful that a consultative process, as was adopted by Sebi in case of revision to the rules governing participatory notes, can resolve the matter and lead to greater clarity by the markets regulator and the Finance Ministry to check any exodus of funds from India. Top executives of several foreign fund houses, on condition of anonymity, said a clarity is needed at the earliest and they are hopeful that the regulator would soon take up the matter with the government, reports PTI.
A senior official said the matter could be discussed at the upcoming board meeting of Sebi, after which the regulator can communicate to the government the taxation related concerns raised by the foreign portfolio investors. The board is scheduled to meet on January 14, days before the presentation of Union Budget on February 1, and would also discuss various other measures to deepen the equity and debt markets, as also for improving ease of doing business in India. Overseas players seem to be caught in a bind with prospects of higher tax liabilities, especially with recent clarification making it clear that indirect transfer rules would be applicable on FPIs. Besides, reports suggesting that more taxes might be on the way for capital market players have also raised concerns among FPIs, which of late has been pulling out substantial investments from their Indian portfolios.