Mumbai: Finance Secretary Hasmukh Adhia on Friday said that the 'grandfathering' provision for long-term capital gains tax is equally applicable to foreign portfolio investors ( FPIs ) after some experts expressed concern over the wording of the amendment in the Finance Bill.The Income-Tax Department also tweeted that 'grandfathering' will be applicable to FPIs.The fear was that due to the way the amendment was made in the Income-Tax Act, it could mean that FPIs may have been excluded from 'grandfathering' longterm capital gains tax. "As far as 'grandfathering' and the limit for levy of tax ( LTCG ) is concerned, it applies to both residents and non-resident investors," Adhia said.Before the clarification, tax experts were of the opinion that the Income-Tax Act amendment allowing LTCG tax to be imposed at 10% appeared to leave out FPIs from the 'grandfathering' benefit. This would have meant that foreign investors would have had to pay tax on gains exceeding Rs 1 lakh in a financial year from the sale of shares and equity mutual funds. Some experts said the exclusion of FPIs from the 'grandfathering' benefit may not have been intentional.Industry experts said they expect the government to issue a clarification in the coming days. Many FPIs may now consider setting up a pooling or investment vehicle in the Netherlands or France to obtain the tax advantage.

Source: Economic Times February 03, 2018 04:52 UTC