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FIIs not assessed as traders

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Chidambaram calls it manufactured crisis, blames uninformed reporting

MR P. CHIDAMBARAM
MR P. CHIDAMBARAM

Our Bureau

The CBDT draft supplementary instructions list 15 conditions to decide whether a person is a trader or an investor.

New Delhi, May 18

Terming Thursday's crash in stock market indices as a "manufactured crisis," the Finance Minister, Mr P. Chidambaram, today said that no FII has so far been assessed as a trader.

"No FII has been assessed as a trader as they are investors and have no permanent residence here (for tax purposes)," Mr Chidambaram told newspersons.

He said that "uninformed reporting" by a section of media on the draft supplementary instructions issued by the Income-Tax Department led to the "manufactured crisis" of fall in stock indices.

The Central Board of Direct Taxes (CBDT) is considering supplementary instructions to assessing officers of the Department to help them distinguish between share traders and investors so as to plug tax avoidance.

It has invited comments on the proposed instructions from all stakeholders by May 25.

The draft supplementary instructions list 15 conditions as a test to decide whether a person is a trader or an investor.

Stock market observers contend that the apprehension (mainly emanating from reports in section of media) that these supplementary instructions would place FIIs at a tax disadvantage, coupled with the general decline in stock market prices in the Asian countries due to global factors, led to Thursday's carnage on the Indian bourses. Earlier in the day, Mr Chidambaram sought to play down the plunge saying that every movement and swing of the market did not require a comment.

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(This article was published in the Business Line print edition dated May 19, 2006)
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