FinMin may hold discussions with FIIs on Tuesday

Finance Ministry officials are likely to meet Foreign Institutional Investors on June 10 to encourage them to make more investments in the country and set up permanent establishments here.

"The meeting will discuss the problems faced by FIIs and remove bottlenecks to ensure that they set up permanent establishment in the country," said an official.

In the recent weeks, FIIs have made huge investments into the Indian market amid expectations that the new government would take measures to bolster the economy.

According to experts, FIIs are concerned about taxation in case they set up a permanent establishment in the country.

"A clarification that income from purchase and sale of shares by FIIs (now FPIs) will be taxed as capital gains should help attract increased foreign investment into India".

Anish Thacker, Partner (Tax & Regulatory Services) at Ernst & Young said. At present, there is ambiguity on whether FIIs that set up permanent establishment here would be liable for tax on its entire business income.

In such a scenario, the entire business income would attract about 40% tax. Currently, FIIs are only subject to long term capital gains tax of 15%.