Retrospective tax relief on FPI indirect tranfers
With retrospective effect from financial year 2011-12, two categories of foreign portfolio investors (FPIs) are exempted from tax on indirect transfers.
The decision has been cheered by investors since, last year, Central Board of Direct Taxes (CBDT) had directed inclusion of FPI in the tax ambit.
It is expected that this move will offer additional respite and make Indian stocks more buoyant.
Retro amendment on FPIs: Budget 2017
CBDT circular had given jitters to foreign investors
"The CBDT circular had given jitters to foreign portfolio investors. Clarification that investors in offshore funds registered as FPI will not be subject to indirect transfer provisions will allay their concerns," says Shefali Goradia, partner, BMR Advisors.
Various categories of FPI
The proposals include exemption from provisions of indirect transfer tax for FPI category I and category II.
Category I includes foreign banks, sovereign wealth funds and government agencies.
Category II investments are, for example, mutual funds and pension.
Category III involves hedge funds and high-risk foreign investments that will not enjoy the tax relief.
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