New Delhi: Trying to soothe the nerves of overseas investors, Finance Minister Pranab Mukherjee Friday said holders of Participatory Notes (P-notes) derivatives through which foreign nationals invest in Indian securities will not be liable for tax.
“Indian tax authorities would not go beyond the financial institutional investors (FIIs) to check any further details about the participatory note holders. Accordingly, question of liability for tax in India of the participatory note holder would not arise,” Mukherjee told reporters.
The finance minister said the proposed tax amendments were not aimed at harassing genuine investors.
“I would like to categorically clarify that the intention of the government is not to cause any harassment to genuine investors,” Mukherjee said, referring to the confusion among investors over the proposed General Anti-Avoidance Rules (GAAR), which will come into effect from April 1.
“Participatory note holders invest in Indian stock market through FIIs. The Indian tax authority would examine the tax liability of the said financial institutional investors,” he said.
The finance minister said the government would issue a further clarification on the issue in “due course”.
P-notes are derivatives through which overseas investors invest in Indian stock markets. They are issued by foreign portfolio investors registered with the Securities and Exchange Board of India to those investors or hedge funds who are not registered with the Indian market regulator.
Indian equities markets rallied after the finance minister’s clarification. The benchmark Sensex of the Bombay Stock Exchange jumped 270 points to 17,329.
At the National Stock Exchange, Nifty was trading with a gain of nearly 1.7 percent.