IT Department cracks down on FPIs; Serve Notices to Foreign Portfolio Investors after alerts from Intelligence

The Income Tax Department has taken action against Foreign Portfolio Investors (FPIs). Based on sources, the central government got information about foreign portfolio investors via intelligence inputs, prompting this action.

As per to the sources, the Income Tax Department has launched an investigation into suspected foreign portfolio investors. The tax department has requested specific details regarding cash entering into India from FPIs.

Following the receipt of intelligence inputs, the Income Tax Department issued notices to a number of FPIs. These notices include numerous requests from the IT department, such as the method of fund-collecting, among other things.

The Income Tax Department has broadened its probe by requesting the names and addresses of the top 20 investors. Furthermore, they have asked FPIs which trading terminals were utilised to make orders. The concept of round-tripping on foreign portfolio investors raises concern.

As a result, the tax authority is now concentrating on identifying genuine investors. Several countries with little or no or drastically reduced taxes are suspected of being involved in round-tripping, according to the sources. These countries include, among others, the Cayman Islands, the Bahamas, Bermuda, and Singapore.

The tax authority has also enquired about the procedure for reaching out to potential investors via FPIs. They have requested specifics on any documents linked to this process. They have also inquired as to whether Indians had invested in your funds. The tax department has directed FPIs to separate Assets Under Management (AUM) into Indian and non-Indian investments and to disclose the size of each investment.

In terms of current restrictions for foreign portfolio investors, resident Indians can currently only invest in FPIs that have less than 50% of their overall exposure in India. It is critical to ensure that non-resident Indians (NRIs) do not own more than 50% of the corpus of any fund.