The government has eased personal account number (PAN) requirements for foreign investors in the international financial services centre.
The requirement had been an impediment for category III alternative investment funds based out of the Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC). The latest development would also help foreign investors on GIFT-based exchanges, according to an expert.
A gazette notification on Tuesday said that section 139A, which requires people to get PAN numbers, would not apply to such investors.
“The provisions of section 139A shall not apply to a non-resident, being an eligible foreign investor, who has made transaction only in a capital asset referred to in clause (viiab) of section 47 which are listed on a recognised stock exchange located in any International Financial Services Centre and the consideration on transfer of such capital asset is paid or payable in foreign currency,” it said.
The government has been in discussions to promote such international financial services centres within India as an alternative to places like Singapore. Many foreign investors trade in Indian assets through such centres abroad. The setting up of international financial services centres in India is a means of attracting these investors to set up base within the country.
The government had earlier eased PAN requirements for foreign investors in category I and category II alternative investment funds. A category III AIF includes hedge funds which can use sophisticated trading strategies to make money whether the market goes up or down. A category I AIF is one that can invest in start-ups, small and medium enterprises, social venture funds and infrastructure funds. Category II AIFs are private equity funds which buy stake in more mature companies. They also invest in distressed assets. The easing of PAN requirements for them if they are based out of Gift city happened in August 2020.
“The provisions of section 139A shall not apply to a non-resident, not being a company, or a foreign company, (hereinafter referred to as the non-resident) who has, during a previous year, made investment in a specified fund… which has been granted a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, and which is located in any International Financial Services Centre,” said the earlier gazette notification.
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