THE Prime Minister had constituted an Expert Committee on GAAR under the Chairmanship of Dr. Partho Shome to engage in a widespread consultation process and finalise the GAAR Guidelines.

There is an additional issue relating to the taxation of portfolio investment, particularly in the context of the amendment made to the Income Tax Act relating to the taxation of non-resident transfer of assets where the underlying asset is in India. It is necessary to have clarity on the tax liability of portfolio investors and Foreign Institutional Investors as a result of this amendment particularly when the investment is made through a registered stock exchange in accordance with SEBI guidelines and purely in the form of portfolio investment.

Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR.

Therefore, the Prime Minister has decided to refer the issue of the implications of this amendment on FIIs and portfolio investors to the Expert Committee on GAAR.