New Delhi: In a move that will cut down red tape, finance minister Arun Jaitley has proposed to do away with the Foreign Investment Promotion Board (FIPB) in 2017-18 and promised further liberalisation of Foreign Direct Investment (FDI) policy.

A roadmap for phasing out of FIPB will be brought in 2017-18, Jaitley said in his budget speech on Wednesday.

The role of FIPB has been gradually coming down as the government over the past couple of years further opened up the economy and did away with the requirement of obtaining prior government approval for investments in many sectors. Consequently, except for a few sectors like defence and retail, which are under the approval route, foreign investors can invest in India under the automatic route.

The government also moved to provide clarity to foreign investors from the impact of indirect transfer provisions. Jaitley said that foreign portfolio investors (under category 1 and 2 of alternative invetsment funds) are exempted from indirect transfer provisons.

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Application of indirect transfer provisions would have taxed any profits made by funds with underlying assets (including equities) in India.

Milind Kothari, managing partner & head of direct tax, BDO India, said the clarification is timely and will soothe the nerves that were frayed by last year’s circular of the income tax department.

Though the finance minister stopped short of reducing the minimum alternate tax rate, he allowed the future credit to be claimed for 15 years instead of the existing 10 years.

The government also increased allocations to Modified Special Incentive Package Scheme or M-SIPS to incentivize electronic manufacturing.

Jaitley also proposed setting up of a resolution framework under the arbitration and conciliation act to resolve disputes in public contracts in the infrastructure sector.

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