PM refers tax on portfolio investments to GAAR Committee

New Delhi, July 30 (IANS) Prime Minister Manmohan Singh Monday referred the issue of implications of amendment to taxation of portfolio investment on FIIs and portfolio investors to the Expert Committee on general anti-avoidance rule or GAAR.

The amendment to the Income Tax Act relates to the taxation of non-resident transfer of assets where the underlying asset is in India.

The government feels clarity is needed on the tax liability of portfolio investors and Foreign Institutional Investors as a result of this amendment particularly when the investment is made through a registered stock exchange in accordance with Securities and Exchange Board of India (SEBI) guidelines and purely in the form of portfolio investment.

Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR.

The prime minister had constituted an expert commitee on GAAR under the chairmanship of senior tax expert Partho Shome to engage in a widespread consultation process and finalise GAAR guidelines.

The committee was formed after the proposed guidelines created ripples among investors and net foreign institutional investment plummeted.

The terms of reference for the expert committee were examination of the draft guidelines, consultations with stakeholders, redrafting the guidelines and then putting up the redrafted guidelines for further consultation.