Mumbai: The Union budget for this year had proposed a single window clearance for foreign portfolio investors (FPIs), but such a mechanism is far from ready because of differences between the Securities and Exchange Board of India (Sebi) and the Central Board of Direct Taxes (CBDT), said two regulatory officials with direct knowledge.

While Sebi is in favour of reducing documentation, CBDT wants to stick to its own set of documents, including an incorporation document and Foreign Account Tax Compliance Act (Fatca) documents, they said. The single window clearance envisaged a common application form for obtaining know your client (KYC) information under Sebi rules and permanent account number (PAN) under tax rules.

“Sebi had proposed a single form in March. However, CBDT raised reservations on it, and wanted stricter requirements to be included in the form," said one of the people cited earlier. An email sent to Sebi and CBDT on Tuesday was not answered.

“A common application form should make the registration process easier for FPIs and also help to quicken the on boarding process because no separate time will be required to get the PAN. The PAN application however requires the supporting documents to be apostilled or certified by the Indian embassy abroad and we will have to wait and see if that requirement will be diluted under a common application," said Rajesh Gandhi, partner, Deloitte Haskin and Sells.

Typically, in situations where there are two sets of rules the tougher one of the two norms are chosen. “Tax department’s endeavour is to ensure that there is no double compliance. One form should capture Fatca compliance, the PAN documentation, KYC under Sebi norms," said the second of the two people cited earlier.

“A meeting of regulators and tax department was convened last week by Department of Economic Affairs (DEA) where the draft document was more or less finalised. On 28 August, the departments will meet again to finalise the common application form.

“Another issue is on capturing of the FPI data, nodal agency for capturing FPI data would be Sebi. However, work flow processes on how the data sets of income tax department and Sebi will be merged is yet to be finalised," this person added.

The income tax department requires that any FPI seeking to invest in India obtain a notarised KYC from the embassy of country it is investing from for PAN or that it should be registered to invest in India.

“Currently obtaining PAN is a big task for foreign investors given the requirement to apostille documents, which is time consuming and expensive. There is duplication in documents required both by Sebi and tax authorities," said Bhavin Shah, financial services tax leader, PwC India. Simplifying and notifying the common application form becomes necessary considering Sebi’s July ban on FPIs to issue offshore derivative instruments or participatory notes where the underlying assets are derivatives.

“Sebi strictures on P-Notes is forcing many FPIs to register directly with the market regulator. FPIs continue to face the pains of multiple compliances and time consuming approvals," said a custodian, who did not wish to be named. On 21 June, Sebi said it was planning to allow more regions of origin for granting FPI registration by including countries that have a diplomatic tie-up with India and relax “fit and proper" rules.