Government to soon clear confusion over foreign investor tax regime

MUMBAI: The Government will come up with a solution to clear the prevailing confusion around the tax regime for foreign portfolio investors (FPIs) in the next fortnight, a top Finance Ministry official said today.

"We have some tentative solutions, Sebi has come up with some solutions. My sense is that in a couple of weeks we should be able to figure out a solution which is acceptable to foreign participants and to the Revenue Department," K P Krishnan, Additional Economic Affairs Secretary, said at an event organised by ratings agency Crisil here.

FPIs are a new category of foreign investors introduced recently. The category has two sub-components - FIIs and qualified foreign investors (QFI) who can participate in the market directly or on an individual level.

Krishnan admitted that the current system based on the tax deducted at source format "is not very efficient.

"Hence an attempt is being made to come up with a solution which will try and place individuals, primarily which is the missing part of the puzzle, at par with institutions for the purposes of taxation."

With a view to unify FIIs and QFIs, the Sebi had last month approved the FPI regime and announced formulation of the Sebi (foreign portfolio investors) Regulations, 2013.

However, the Revenue Department was reportedly upset with the move as it required some changes in the existing laws, which was introduced in the last Budget.