Income Tax Department cracks down on FPIs, seeks all this information

The Income Tax Department has expanded its scope of investigation by seeking details of the top 20 investors' names and addresses. Additionally, they have inquired from FPIs about which trading terminals were used to place orders. The suspicion arises from the concept of round-tripping on foreign portfolio investors.

Consequently, the tax department is now focusing on identifying genuine investors. According to the sources several countries with little or no taxes or significantly reduced taxes are suspected to be involved in round-tripping. These countries include the Cayman Islands, the Bahamas, Bermuda, and Singapore, among others.

The tax department has also inquired about the process of reaching potential investors through FPIs. They have asked for details on any documents related to this process. Additionally, they have asked whether Indians have invested in your funds. The tax department has instructed FPIs to segregate assets under management (AUM) based on Indian and non-Indian investments and disclose the extent of each investment.

Regarding the existing regulations for foreign portfolio investors, as of now, resident Indians can only invest in FPIs that have less than 50% of their total exposure in India. It is essential to ensure that more than 50% of the corpus of any fund is not held by non-resident Indians (NRIs).