Mumbai: The government today exempted Foreign Portfolio
Investors (FPI) from the tax provisions governing indirect transfer of assets,
setting aside a December
Circular that had sought to bring such
transactions by overseas funds within the ambit of Indian taxes. Foreign funds
welcomed the proposal. Overseas fund managers had sought clarity on the Central Board of Direct Taxes (CBDT) notice that said FPIs would be subject to tax on indirect transfer of shares, a move the Street believed would leave room for protracted future litigation and international arbitration that India has recently witnessed over the transfer of shares involving UK mobile-phone company Vodafone. According to the tax authorities, all income arising from Indian assets or through the transfer of a capital asset situated in India was to be deemed to accrue or arise in India and taxed here. The Budget announcement has now removed FPIs from the ambit of such taxation
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