The requirement had been an impediment for category III alternative investment funds based out of the Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC). The move will help foreign investors on GIFT-based exchanges, according to an expert.
A gazette notification on Tuesday said that Section 139A, which requires people to get PAN, would not apply to such investors.
“The provisions of section 139A shall not apply to a non-resident, being an eligible foreign investor, who has made transaction only in a capital asset referred to in clause (viiab) of Section 47 which are listed on a recognised stock exchange located in any International Financial Services Centre and the consideration on transfer of such capital asset is paid or payable in foreign currency,” it said.
It had previously eased PAN requirements for foreign investors in category I and category II alternative investment funds. A category III AIF includes hedge funds that can use sophisticated trading strategies to make money whether the market goes up or down. A category I AIF is one that can invest in start-ups, small and medium enterprises, social venture funds, and infrastructure funds. Category II AIFs are private equity funds that buy stakes in more mature companies. They also invest in distressed assets. The easing of PAN requirements for them if they are based out of GIFT City happened in August 2020.
“The provisions of Section 139A shall not apply to a non-resident, not being a company, or a foreign company, (hereinafter referred to as the non-resident) who has, during a previous year, made an investment in a specified fund... which has been granted a certificate of registration as a category I or category II AIF and is regulated under the Sebi (Alternative Investment Funds) Regulations, 2012, and which is located in any International Financial Services Centre;” said the earlier gazette notification.