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Tax fillip for foreign investors

Norm tweak

Mumbai, Dec. 24: The government has clarified to the market regulator that all the three categories of financial portfolio investors (FPI) will get the same tax treatment.

Market regulator Sebi said it had received a communication from the department of economic affairs on treating the three categories of FPIs similarly vis-a-vis taxation.

“As regards FPI regulations, the communication from the department of economic affairs to the CBDT and to Sebi, conveying the decision that all three categories of FPIs would be given similar tax treatment as available to the FIIs presently, was noted,” the Securites and Exchange Board of India (Sebi) said in a statement following a board meeting today.

In October, the market regulator had announced the new FPI regulations, putting in place a simplified regime for foreign investors.

The FIIs, their sub-accounts and qualified foreign investors (QFIs) were merged into a single and new investor class, called FPIs, divided into three categories according to their risk profiles.

Category I FPIs, the lowest risk entities, will include foreign government and government-related foreign investors; Category II comprises “appropriately regulated” entities such as university funds, university-related endowments and pension funds, among others; the third category includes entities such as qualified foreign investors.

The new regime, which brought about an easier registration process and simplification of rules, is expected to boost dollar inflows.

Market circles said the implementation of the FPI guidelines was delayed because of differences within the government over taxation. While Sebi was in favour of a similar tax treatment across the three categories, the income tax department was apprehensive of such a relaxation.

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