New Delhi: Describing Non-Resident Indians as a “national resource,” a grouping of NRIs led by Hindujas has asked the government for tax parity with Foreign Institutional Investors (FII) on short-term gains in the stock market.
In a pre-budget memorandum to finance minister Pranab Mukherjee, the IndusInd International Federation (IIF) said selective benefits may be offered to NRIs enabling them to make India the hub for their global activities.
“NRIs are required to pay tax at the rate of 10% on their short-term gains in the equity markets. However, short-term capital gains earned by Mauritius-based FIIs on Indian stock market transactions are tax exempt.
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“The treatment of taxation on short-term capital gains needs to be on par for both FIIs and NRIs,” said the IIF, the apex organisation of NRIs, headed by UK-based Hinduja Group chairman S P Hinduja.
IIF’s leading members include Ram Buxani from UAE, K Sital from Hong Kong, Nari Pohani from the US, Vashi T Purswani from Thailand and Kamal Fabiani from Spain.
It said that several NRIs would like to make India their permanent home after retirement. “The Indian tax authorities should not tax the income derived from interest on their investments in savings and pension plans in foreign institutions and foreign countries,” the IIF said.
Prohibition on overseas corporate bodies (OCBs) is an impediment to the NRIs investing in India, the IIF said, adding a large number of expatriates have their wealth in corporates. As long as proper disclosures are in place and ‘Know-Your-Customer´ information is provided, the OCBs should be permitted to invest in the country, it said.
“By lifting the ban on OCBs and simplifying the procedures for individual NRI investments, the market will be widened with more players,” the IIF said in the pre-Budget memorandum.
At present overseas Indian are not allowed to buy farm land. The IIF has suggested that the permission be granted for them to purchase or take on long-term lease of agricultural land for cultivation.
“This will enable them to bring in latest technology and provide support to farming activity and increase and modernise agro production,” it said.
The IIF also made suggestions about electoral reforms in the country. The NRIs favoured state funding of elections and stopping the “flow of money into the parallel economy”.
The body said it should be mandatory for political parties to maintain separate accounts of election expenditure which should be audited by recognised firms under direction of the Election Commission.
The NRIs’ body said the policy framework for foreign direct investment should be conducive for attracting inflows into infrastructure, health and higher education.
It called for increase in the sectoral caps in insurance, defence production, air transport services and single brand retailing. It also sought opening up of the multi-brand retail for FDI.
The NRIs would like review of the double tax avoidance treaties “in totality”, so as to make them FDI-friendly.
There is a case for increaisng the maximum stake that an offshore financial sector entity/bank can hold in an Indian bank, it said.
A demand for extension of depreciation rate of 50% on commercial vehicles was also made. The current rate is valid till September this year.