Government on Tuesday promised to address tax concerns of foreign portfolio investors (FPIs) even as it nudged them to set up permanent establishment in the country.
Ahead of the Budget for 2016-17, the Finance Ministry in a bid to ease doing business in financial market met over two dozen FPIs including Citibank, Deutsche Bank, Fidelity, Goldman Sachs and BlackRock, and sought their views on various issues related to the sector.
“Number of suggestions have come and they have to be looked into and it will be placed in front of the Government.The Government will take a decision soon. Tax issues were naturally raised. We discussed fund management industry in India,” Economic Affairs Secretary Shaktikanta Das said. The meeting was attended by top officials of RBI, Sebi, and CBDT. According to sources, the Government wanted to know from FPIs about the steps needed to encourage them to set up business in India.
Currently, foreign investors routing funds through countries with which India has Double Taxation Avoidance Agreement (DTAA) are exempt from paying short-term capital gains tax. However, if foreign fund houses set up business in India, they would be liable to capital gains tax as per the domestic taxation laws.