Deficient returns by Sebi-registered FIIs not defective: CBDT

In a relief to over 500 FIIs, the Income Tax department today said incomplete or deficient returns filed by foreign portfolio investors will not be treated as 'defective' if the entities are registered with Sebi and do not have a permanent base in India.
The I-T Department had slapped notices on several Foreign Institutional Investors/Foreign Portfolio Investors (FIIs/FPIs) for failure to furnish Balance Sheets and Profit & Loss accounts in the return of income filed by them.
The FIIs/FPIs who were issued notice totalled over 500, according to PwC. Such investors largely were not required to maintain books of accounts in India as they did not have permanent establishment in the country.

"In order to overcome this difficulty, it is clarified that such returns will not be treated as defective in cases where the FIIs/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.
PricewaterhouseCoopers Partner (Financial Services, Tax and Regulatory) Suresh Swamy said defective return notices were issued multiple times to over 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 has been provided by the FIIs/FPIs are being taken up for processing at CPC Bengaluru.

For previous assessment years where the above information is not available in the I-T Return, FII/FPI may 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 will 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 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.
So far this year, overseas investors have made a net investment of Rs 15,519 crore in equities and Rs 50,116 crore in debt markets.