Broad-based criteria for safe harbour to apply to category-II FPIs

May dissuade these investors from delegating fund management responsibilities to Indian managers

The requirement to meet broad-based conditions, so as to qualify for a safe harbour under Indian tax laws, will also apply to category-II foreign portfolio investors (FPIs) even though category-I investors remain exempt, the government has clarified in a notification.
 

This may dissuade category-II FPIs, especially funds from Cayman Islands, British Virgin Islands, and West Asia, from delegating fund management responsibilities to Indian fund managers, said experts.

Less than 20 per cent of FPIs fall in category-II. This category is already at a disadvantage because it has to abide by indirect transfer provisions. Such provisions apply to funds that have deployed