Contact Your Financial Adviser Money Making MC
18
January 2017
In
a measure of relief to foreign portfolio investors (FPIs), venture capital and
private equity investors, the government on Tuesday said it is putting on hold
its recent circular on taxation of indirect transfers. The Total Investment & Insurance Solutions
India's
Central Board of Direct Taxes (CBDT) had on December 21 issued a circular
applying indirect transfer provisions on FPIs whereby any profits made by funds
with the underlying assets would have been taxed, including equities in India. The Total Investment & Insurance Solutions
Application
of these provisions would have subjected foreign portfolio investors to greater
scrutiny by the Income Tax department and would have led to double-taxation in
many cases.
"After
the issue of the aforementioned circular, representations have been received
from various FPIs, FIIs (foreign institutional investors), VCFs (venture
capital funds) and other stakeholders. The stakeholders have presented their
concerns stating that the circular does not address the issue of possible
multiple taxation of the same income," a Finance Ministry release here
said.
"The
representations made by the stakeholders are currently under consideration and
examination. Pending a decision in the matter the operation of the above
mentioned circular is kept in abeyance for the time being," it said. The Total Investment & Insurance Solutions
Indirect
transfer provisions deal with taxation of transactions, where even though the
transfer of shares happened overseas, the underlying assets were in India.
Indirect
transfer provisions were introduced in the Income Tax Act in 2012, with
retrospective effect cluase by which the Indian government sought to bring
British telecom major Vodafone's $11 billion acquisition of Hutchison Essar in
2007 and other such transactions under the tax net.The Total Investment & Insurance Solutions
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