Three big worries for Indian
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/ Rediff : Even as financial markets seem to be treading water at the moment,
there are at least three issues that are of immediate concern for any investor
in Indian equities.
The first issue concerns the implications of the new general anti-avoidance
rules (GAAR) for foreign institutional investors (FIIs) and how these investors
view India and trade from April 1 onwards.
There is still tremendous confusion over these tax provisions, and no one is
willing to clarify them.
Some brokers with a Mauritius entity are stopping all participatory-note
(P-note) transactions, so as to not increase potential tax exposure.
Other brokers (those having a Singapore-based
Brokers without a strong on-the-ground presence
in Mauritius are worried about not being able to prove residence and hence
Counterparties with a strong on-the-ground presence in either Singapore or
Mauritius (depending on where they are issuing the P-notes from) are not worried
about proving their residence; they are worried about the income tax authorities
"looking through" the P-note issuer and testing the tax residence of the actual
end-user of the instrument (the end investor).
Funds that have their own FII licence are also confused. Most of them do not
know if they will be able to prove tax residence, and thus have no idea how to
transact business from April 1 onwards.
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