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India Clarifies Defective Return Notices For Foreign Investors

by Mary Swire, Tax-News.com, Hong kong

11 December 2015


The Indian Ministry of Finance has announced that tax returns filed by foreign portfolio and institutional investors with no profit or loss accounts will not be treated as "defective" if they meet certain requirements.

A statement published by the Ministry on December 10 explains that notices of defective returns were issued to FPIs and FIIs under Section 139(9) of the Income Tax Act in cases where balance sheet and profit and loss account boxes were not filled. However, the Ministry clarified that such returns will not be treated as defective if the FIIs/FPIs in question meet the following conditions:

  • They are registered with the Securities and Exchange Board;
  • They have no permanent establishment or place of business in India; and
  • They have provided basic information required under section 139(9)(f) of the Income-tax Act, if there is business income.

For assessment years prior to 2015/16 where the above information is not available, FIIs and FPIs may provide such details in their online response on the e-filing portal of the Income Tax Department, the Ministry said.

According to reports, more than 500 FPIs and FIIs have been slapped with defective return notices despite the fact that they are not required to maintain books of account in India.

The announcement is another welcome tax clarification for FPIs and FPIs following the Government's announcement that income tax legislation will be amended to exempt them from the minimum alternate tax for periods prior to April 1, 2015.

TAGS: Finance | tax | business | India | Tax

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