India is looking at 2021 to be a huge opportunity to attract interest from foreign investors. Foreign investors seek a stable tax regime with competitive tax rates. FM may consider switching to the erstwhile system of taxation whereby long term capital gains on the sale of listed shares, subjected to the STT, were exempted from the tax could be a big boost to attract the investors. In order to encourage long-term, patient capital flow into India, the period of holding to qualify as long term could be increased, from one year to say, two years. This change would be welcome by the FPI and could help in the disinvestment agenda of the government. A relook at the TDS provisions for FPIs on dividend needs clarification to permit application of tax treaty rate in line with other foreign investors.
The opinions expressed are author's own. Fidelity International is not responsible for the author's opinions.