Regulated by SEBI, the FPI regime is a route for foreign investment in India. The FPI regime came as a harmonised route of foreign investment in India, merging the two existing modes of investment, that is, Foreign Institutional Investor (‘FII’) and Qualified Foreign Investor (‘QFI’).
Categories of FPI
Key regulatory aspects under the FPI regime
Income tax rates applicable to FPI under India Income Tax
Nature of Income |
Tax Rate* |
|||
---|---|---|---|---|
Capital Gains |
Listed Equity/ Units of equity oriented MF |
Unlisted Equity (not subject to STT) |
Debt securities/ |
Future & Options |
Long Term |
10% |
10% |
10% |
Not applicable |
Short Term |
15% |
30% |
30% |
30% |
Dividend income |
Exempt |
Not applicable |
||
Interest income |
Government bonds - 5%*** Rupee denominated corporate bonds - 5%*** Other securities - 20% Other interest income - 40% |
The said restriction could be overcome if investing under Voluntary Retention Route (VRR)
|
Rupee denominated corporate bonds - 5%*** Other securities - 20% Other interest income - 40% |
The said restriction could be overcome if investing under Voluntary Retention Route (VRR)
* In addition, a surcharge and health and education cess is leviable
** STT – Securities Transaction Tax
*** On interest payments between June 1, 2013 and June 30, 2020 and subject to fulfillment of conditions.
Income tax rates applicable to FPI under the India-Mauritius Double Tax Avoidance Agreement (DTAA)
Capital Gains |
Interest |
|
---|---|---|
Equity Shares |
Derivatives/ Debt |
WHT rate |
Exempt in case of shares acquired pre 01 April 2017 |
Exempt |
7.5% |
Should you decide to set-up an FPI in India, for investments into India, PwC could help with the following