Sebi-registered FPIs get I-T filing relief

The CBDT clarified that incomplete or deficient returns filed by FPIs would not be treated as "defective" if the entities were registered with Sebi and do not have a permanent base in India

After giving a relief to foreign portfolio investors over the issue of minimum alternate tax (MAT), the Income Tax Department on Thursday gave them more reason to cheer over the filing of the so-called defective income tax returns. The Central Board of Direct Taxes (CBDT) clarified that incomplete or deficient returns filed by foreign portfolio investors (FPIs) would not be treated as "defective" if the entities were registered with Sebi and do not have a permanent base in India. This would provide relief to over 500 FPIs.

The I-T Department had slapped notices on several FPIs for failure to furnish balance sheets and profit & loss accounts in the returns of income filed by them.

More than 500 FPIs were issued notices, according to PwC. Such investors largely were not required to maintain books of accounts in India as they did not have permanent establishments in the country.

"In order to overcome this difficulty, it is clarified that such returns will not be treated as defective in cases where FPIs are registered with Sebi, have no permanent establishment/place of business in India and have provided basic information...if there is business income," the department said in a statement. Suresh Swamy, partner (financial services, tax and regulatory) at PricewaterhouseCoopers, said defective return notices were issued multiple times to more than 500 corporate FPIs in the past.

"This is a welcome clarification from the CBDT and will put to rest a matter which has been a concern for corporate FPIs filing tax returns in India," Swamy said.

The Central Board of Direct Taxes (CBDT) said returns for assessment year 2015-16 where the Sebi registration number had been provided by the FIIs/FPIs were being taken up for processing at CPC Bengaluru.

For previous assessment years, where the above information was not available in the I-T Returns, FII/FPI might provide such details in their online response on the e-filing portal of the www.incometaxindiaefiling.gov.in to the previously issued notice.

Swamy said the return of income (ROI) forms would now have to be amended to seek additional information whether the FPI has a place of business in India.

"For earlier years, details like SEBI Registration number and affirmation of no permanent establishment/no place of business will have to be provided in the IT e-filing portal," he said.

Finance Minister Arun Jaitley had in the 2015-16 Budget exempted FIIs from payment of minimum alternate tax with effect from April 1, 2015. Further, an amendment will also be carried out in the Income Tax Act to exempt FIIs from payment of MAT on capital gains retrospectively as well.

So far this year, overseas investors have made a net investment of Rs 15,519 crore in equities and Rs 50,116 crore in the debt markets.