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NEW DELHI(WEB TEAM): Overseas investors have reduced their exposure to Indian capital markets amid taxation worries and have pulled out over Rs 12,000 crore from it so far this month.
During January to April, investments by Foreign Portfolio Investors (FPIs) totalled Rs 94,241 crore, but a month-on-month analysis shows the fund flows are witnessing a declining trend.
FPI investments in January 2015 stood at Rs 33,688 crore, before dropping to Rs 24,564 crore (February), Rs 20,723 crore (March) and Rs 15,266 crore (April).
Things got worse in May as FPIs have withdrawn an estimated Rs 12,256.21 crore so far this month, according to the latest data from depositories and stock exchanges.
The huge sell-off comes on apprehension that the government would impose a 20 per cent Minimum Alternate Tax (MAT) on profits earned by overseas investors.
“FIIs continued to lighten their weight in Indian equities,” Reliance Securities Head of Research Hitesh Agrawal said.
Meanwhile, expressing concerns over FPIs facing MAT demand, global rating agency Fitch has said the controversy may prompt FPIs to think twice before investing in India.
The Income Tax Department has already issued notices to 68 FIIs totaling Rs 602 crore over non-payment of MAT.
Some foreign investors have gone to court while the government has decided to set up a high-level committee to resolve the issue.
Since January 2015, overseas investors have invested a net amount of Rs 94,241 crore in the Indian capital markets (equity and debt).
The Finance Ministry is likely to come out with simplified Income Tax Return (ITR) forms by the end of this month which may exclude disclosure of dormant bank accounts as also those which do not have a minimum specified balance.
The simplified form, which is being brought after the earlier version was opposed by industry and MPs for cumbersome disclosure norms, is also likely to relax the requirement of reporting details of every foreign travel undertaken.
“An internal meeting of the Finance Ministry officials on the issue will take place soon after Parliament session ends. We are looking at whether dormant bank accounts need to be disclosed as most of the time they have very little balance,” a top official told PTI.
The final decision on simplification of the ITR forms (ITR-1 and ITR-2) would be taken by Finance Minister Arun Jaitley before the end of the month, the official said.
The salaried individuals and those persons who do not have business/professional income are required to file income tax returns in either ITR-1 or ITR-2 by July 31.
Following the controversy over the new ITR forms which sought details of bank accounts and foreign visits, the revenue department announced putting them on hold. Jaitley promised to come out with “extremely simplified” forms.
The tax department also held consultations with industry chambers seeking their views for simplification.
According to the official, “it is being considered whether a minimum balance could be specified for the purpose of disclosure of details of bank accounts in the return form.”
The ITR forms, which was notified by the CBDT had last month for the current assessment year, had specific columns for banks accounts, IFSC Code, names of joint account holders and foreign visits, including the ones paid by the companies.
Although the new forms had 14 pages, an ordinary tax payer was required to fill just the initial 2-3 pages, the official said, adding “the remaining pages seeking greater details were meant for those coming under the high income bracket.”