NEW DELHI: India has notified guidelines for foreign institutional investments in the country’s Capital markets. The guidelines provide for a concessional tax regime at the rate of 20% on dividends and interest income from such investments. Long term Capital gains on one year or more will entail tax at the rate of 10% only. There are no restrictions on total volume of investments. There is no lock-in period for any investment. Portfolio investment in a company, however, cannot be more than 24% of the issued share capital. A single foreign investor cannot hold more than 5% shares in one company.
Disinvestment can only be done through recognized stock exchanges in India. All intending institutions will have to get registration from Securities Exchange Board of India. Under the foreign exchange regulations, each such institution will also have to seek permission from India’s Reserve Bank.
These concessions are aimed at inviting foreign investment companies to invest in India. These have been issued on the eve of finance minister Manmohan Singh’s projected visit to certain western countries later this week. As an immediate fall-out of the measure, India’s capital markets flared up on Sept.15, raising Bombay’s sensitive index by more than 100 points in a single session,
Article extracted from this publication >> September 25, 1992
