FPIs seek clarity on tax treaties

New Delhi: Fearing a rise in their business costs, some foreign portfolio investors have knocked on the doors of markets regulator Sebi and Finance Ministry for greater clarity on taxation rules for indirect transfer of securities, especially after revision to treaties with key jurisdictions like Mauritius, Cyprus and Singapore.

The foreign funds, who have pumped in billions of dollars into Indian capital markets over years, have been on a heavy selling spree in recent months, including in bonds segment, amid an overall weakness in the domestic markets and adverse global cues.

The investors are, however, hopeful that a consultative process, as was adopted by Sebi in case of revision to the rules governing participatory notes, can resolve the matter and lead to greater clarity by the markets regulator and the finance ministry to check any exodus of funds from India.

Top executives of several foreign fund houses, on condition of anonymity, said a clarity is needed at the earliest and they are hopeful that the regulator would soon take up the matter with the government.

A senior official said the matter could be discussed at the upcoming board meeting of Sebi, after which the regulator can communicate to the government the taxation related concerns raised by the FPIs.

The board is scheduled to meet on January 14 and would also discuss various other measures to deepen the equity and debt markets, as also for improving ease of doing business in India.