FPIs may Rush to Stock Up to Avail Treaty Tax Ben­e­fits

Tax­man not to ques­tion FPIs for bring­ing money via Mau­ri­tius, Sin­ga­pore till March 31

The Economic Times - - The Infosys Saga -

Mum­bai: In­dia-fo­cused off­shore funds are ask­ing clients to ad­vance their planned in­vest­ments into them be­fore April 1 — the dead­line for for­eign port­fo­lio in­vestors to avail treaty tax ben­e­fits. From the new fi­nan­cial year, for­eign in­vestors us­ing coun­tries such as Mau­ri­tius and Sin­ga­pore to route their in­vest­ments into In­dia will have to start pay­ing cap­i­tal gains, though at a re­duced rate for the time be­ing. Also, the tax depart­ment will not ques­tion in­vestors for bring­ing money through this route till March 31.

“For­eign in­vestors may up­front their planned pur­chase of In­dian stocks to be­fore March 31 to take ad­van­tage of the

grand­fa­ther­ing win­dow so they don’t have to pay any ex­tra cap­i­tal gains tax,” said Samir Arora, fund man­ager, He­lios Cap­i­tal.

Last year, In­dia amended its tax treaty with Mau­ri­tius and Sin­ga­pore, from where close to 80% of for­eign port­fo­lio money flows into the coun­try. The amended treaty says that FPI in­vest­ments in In­dia held be­fore April 2017 can still avail t r e a t y b e n e f i t s , whi c h they call ‘Grand­fa­ther­ing’. This means FPIs hold­ing stocks be­fore April 2017 will not be sub­ject to any tax or even scru­tiny un­der the Gen­eral Anti Avoid­ance Rule (GAAR), a rule which gives the tax­man power to ques­tion for­eign in­vestors on their in­vest­ments into the coun­try. The rule has prompted hedge funds and ex­change traded funds (ETFs) which in­vest in In­dia to push in­vestors to use this win­dow to bring in money.

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