PM extends GAAR committee's mandate

Prime Minister Manmohan Singh on Monday extended the mandate of the Parthasarathi Shome-led committee on General Anti-Avoidance Rules (GAAR), and also referred the taxation of portfolio investments to the panel.

The prime minister’s office said there was an additional issue relating to the taxation of portfolio investment, particularly in the context of the amendment made to the Income Tax Act on the taxation of non-resident transfer of assets where the underlying asset was in India.

“It’s necessary to have clarity on the tax liability of portfolio investors and foreign institutional investors (FIIs) as a result of this amendment, particularly when the investment is made through a registered stock exchange in accordance with Securities and exchange board of India (Sebi) guidelines and purely in the form of portfolio investment,” it stressed.

Obviously, any clarification in this regard would need to be harmonised with the GAAR guidelines and will have to address concerns outside GAAR. The prime minister, therefore, had decided to refer the issue of the implications of this amendment on FIIs and portfolio investors to the expert committee on GAAR.

The panel has been formed to engage in a consultation process and finalise the draft guidelines by September 30.