India waives retrospective tax on foreign funds after record selloff

File photo of stock brokers at the Bombay Stock Exchange [Xinhua]

India has announced foreign institutional investors won’t have to pay a tax on profits earned before April 2015.

Foreign institutional investors (FII) sold a net 168.77 billion rupees ($2.55 billion) in Indian shares in August.

In a policy briefing in the Indian capital on Tuesday night, Indian Finance Minister Arun Jaitley clarified that foreign institutional investors will not be subject to the so-called minimum alternative tax (MAT).

The US-India Business Council (USIBC) has welcomed the Indian government’s acceptance of a panel’s recommendation that the MAT provisions do not apply retrospectively to foreign institutional investors before April 1 this year.

India’s National Securities Depository Limited (NSDL) has said foreign investors sold a record amount of Indian shares in August, which aided in the Nifty falling down 6.6 per cent last month.

Around 70 per cent of the Indian market is dominated by foreign institutional investors.

Indian stocks slumped to a one-year low on Tuesday after data showed the country’s economy grew less than estimated in the April-June quarter.

An imminent US Federal Reserve rate hike could also trigger further stock selloff in India.

A more hawkish Fed policy will result in the US dollar strengthening further, putting more downward pressure on emerging market economies.

 

 

TBP and Agencies