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Foreign portfolio investors get incentives to push funds in India

Sebi now allows them to participate in Exchange Traded Commodity Derivatives market

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The Bombay Stock Exchange. The FPIs will be subject to risk management measures which are applicable from time to time as announced by SEBI.

The Bombay Stock Exchange. The FPIs will be subject to risk management measures which are applicable from time to time as announced by SEBI.

Foreign portfolio investors have recently pulled out substantial funds from India in view of the higher interest rates announced by the US Federal Reserve. Are any steps being taken to encourage these investors to invest in India in different products?

Published: Sat 22 Oct 2022, 3:41 PM

Updated: Sat 22 Oct 2022, 3:50 PM

  • By
  • H. P. Ranina

To attract more foreign portfolio investment in India, the Securities & Exchange Board of India has now permitted foreign portfolio investors to participate in Exchange Traded Commodity Derivatives market. This is subject to the condition that foreign portfolio investors can participate in cash settled non-agricultural commodity derivative contracts and indices. The FPIs will be subject to risk management measures which are applicable from time to time as announced by SEBI. They will be subject to all rules, regulations and instructions as well as position limit norms as are applicable to clients which are issued by SEBI and stock exchanges from time to time. However, FPIs which belong to individuals and corporate categories will be allowed a position limit of 20 per cent of the client level position limit in a particular commodity derivative contract. Stock exchanges may provide additional safeguards as deemed fit to manage risks and ensure orderly trading in Exchange Traded Commodity Derivatives.

While more and more electric scooters and two-wheelers are manufactured in India, there have been reports of these vehicles catching fire or exploding. Are steps being taken to mitigate this problem?

The reason for the mishaps is that in electrical vehicles the batteries get overheated when there is sudden acceleration. Manufacturers of EVs are working on the heat release mechanism. Therefore, the design of the battery is most critical. A lot of research is now being done to determine how well the battery integrates with the rest of the components in the vehicle. Currently, these batteries are imported but more and more manufacturing units are coming up in India with indigenised batteries. Software is being developed for designing the battery packaging and the coding which would prevent malfunctioning. Development work is also taking place to make the batteries smarter by reducing the charging time and lengthening the life of the battery. A motorbike is now being launched by a manufacturer in India which will be eight times more powerful than standard EV scooters by hiring aerospace engineers to develop the systems required for this purpose.

My son is a software engineer who is based in India. He also provides services to an American company. For the income earned in India, the tax is deducted at source by the Indian client; likewise the American client deducts tax at source while paying fees. I want to know the tax implications of this and whether he will get credit for the tax withheld by the American company from the professional fees earned by my son.

If your son is a resident of India, he will be liable to tax on the aggregate amount of income earned in India as well as the United States of America. He will be entitled to claim tax credit for the amount withheld by the American company which pays your son professional fees. The tax credit will be available for the same financial year for which he is assessable for the foreign income earned. As per Rule 128 of the Income-tax Rules, Form No. 67 needs to be filed by your son for claiming the foreign tax credit on or before the due date of filing the tax return. Recently, there was litigation where a tax payer did not file the form at the time when the tax return was filed. However, the form for claiming the foreign tax credit was filed later before the assessment was completed. The Income-tax Appellate Tribunal held that the later filing of the form was a procedural lapse and this could be condoned. Therefore, the foreign tax credit was allowed by the Tribunal. However, in order to avoid such litigation, your son would be well advised to file the form for claiming the foreign tax credit at the same time when he files his tax return for the relevant assessment year.

H. P. Ranina is a practising lawyer, specialising in tax and exchange management laws of India.



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