SEBI Clarifies Offshore Funds' Tax Dues Liability for Banks, Brokers

Indian Regulator Clarifies Tax Liability for Offshore Funds

The Securities and Exchange Board of India (SEBI) has clarified on Wednesday that Indian banks and brokers will not be liable for taxes owed by local representatives of offshore funds. This move comes after the federal tax authorities requested the representatives of offshore funds to furnish their details for Indian tax identification, raising concerns over potential tax liability.

The clarification was made via email to banks and brokers, following consultations with the tax department. This move aims to alleviate concerns that had delayed fresh applications from offshore funds looking to enter the Indian market. The clarification is seen as a positive step towards easing entry and exit rules for foreign investors, who have been seeking easier regulations.

India currently has more than 12,150 licensed foreign investors, who have been seeking easier entry and exit rules from SEBI in the past. Investors have also been spooked by aggressive tax practices in the past, including the top court ruling against Tiger Global in a landmark tax demand case.

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The clarification comes at a time when foreign investors have remained net sellers of Indian equities. The Indian depositories are expected to release a public clarification on the issue soon. This move is seen as a boost to the closure of pending foreign investor applications, and is expected to alleviate concerns arising from the new requirement.

Rajesh Gandhi, partner at Deloitte Touche Tohmatsu India, stated that the clarification should give a boost to the closure of pending foreign investor applications and alleviate all concerns arising from the new requirement.