India's union finance minister Pranab Mukherjee said on Friday that the investors holding participatory notes, or P-notes would not have any tax liability in the country.
He pointed out that the tax authorities in the country would determine the tax that the financial institutional investors (FIIs) are liable to pay in the country. They will not find out any additional information about the holders of participatory notes. Thus there will be no tax liability for such holders under the Indian laws.
Mukherjee has proposed the GAAR as part of the union budget presented on March 16 for the year starting on April 1, 2012. The GAAR is aimed at avoid the aggressive tax avoidance schemes that exploit the liberal tax laws in investments between countries like India and Mauritius.
He explicitly said that GAAR will not hurt honest taxpayers in the country and the government will not punish genuine foreign investors who invest in domestic shares through participatory notes.
Foreign portfolio investors that are registered with the Indian market regulator issue p-notes. They can also be issued by their sub-accounts for foreign investors, who often invest in thescheme anonymously. These p-notes often avoid paying taxes in India but the introduction of GAAR would impact the investments in the instruments due to introduction of taxes.
The experts had warned that the introducing taxation for Participatory notes would shut down the avenue for investments to flow into the country.
Source:topnews.in
Source:topnews.in
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