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
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.