Ending the impasse on tax treatment of foreign portfolio investors (FPI), the market regulator on Tuesday said all categories of such investors would be given the same tax treatment as FIIs.
In this regard, the Securities and Exchange Board of India referred to the communication of the Union Finance Ministry’s Department of Economic Affairs to the Central Board of Direct Taxes.
The clarity on tax treatment of FPIs is aimed at encouraging inflows into the domestic equity and debt markets.
Tejesh Chitlangi, Partner, IC Legal, said “The Chandrasekhar Committee Report and the proposed FPI Regulations were silent on taxation of FPIs and therefore created some ambiguity, which will now stand resolved with this piece of information. This clears the way for the necessary tweaks to be done in the Income Tax Act so as to extend the provisions and tax rates applicable on FIIs to the FPIs (irrespective of the category) and which should make FPI investments smooth.”
Shelf Prospectus In its board meeting here, SEBI allowed a host of entities to file shelf prospectus and raise debt through public issue of non-convertible debentures (NCDs).
These entities include public financial institutions, banks, CBDT authorised issuers, infrastructure debt funds – NBFCs, RBI and NHB-registered NBFCs/HFCs and entities that have listed their shares/debentures on stock exchanges for at least three years.
SEBI has mandated that NBFCs/HFCs/listed entities could raise NCDs only if their net worth is Rs 500 crore, besides a three-year track record of profitability.
In addition, they are required to have a credit rating of at least ‘AA-’ (double A minus) with no default history or regulatory action pending against them.
Further, SEBI has allowed companies a maximum of four NCD issuances in a year under a shelf prospectus. Companies just have to file an information memorandum containing material updations during the life of the shelf prospectus (one year).
The SEBI Board approved a proposal to amend its regulations relating to Collective Investment Schemes (CIS) to include pooling of funds under any scheme or arrangement, involving Rs 100 crore or more, to be deemed a CIS. This has been done after an amendment to the securities laws this year.