SEBI asks CBDT about FPI tax role
Sebi has formally sought clarity from India’s tax authority on the tax responsibilities of authorised representatives for foreign portfolio investors after professionals expressed reluctance to take on those roles without clear tax exposure rules. The request highlights a specific legal‑tax ambiguity that is slowing cross‑border capital flows and creating advisory demand. (economictimes.indiatimes.com)
India’s market regulator has asked the Central Board of Direct Taxes to spell out what legal and tax risk an India-based representative of a foreign portfolio investor actually takes on. (economictimes.indiatimes.com) The trigger is practical: foreign portfolio investors need local authorised representatives for registration and compliance, but lawyers, consultants and other professionals have been reluctant to accept those mandates without clearer tax rules. Sebi is now in formal discussions with the tax department to resolve that uncertainty. (economictimes.indiatimes.com) Under India’s tax law, a “representative assessee” can be treated as the agent of a non-resident, and Section 163 says an “agent” can include a person in India with a business connection to that non-resident. Section 160 then says a representative assessee is the person answerable under the law for that income. (incometaxindia.gov.in, indiankanoon.org) That matters because the market-side role and the tax-side role are not the same thing. Sebi’s foreign portfolio investor framework requires authorised representatives and designated depository participants for registration, know-your-customer checks and ongoing compliance, but it does not itself settle whether those representatives could face tax recovery demands. (sebi.gov.in, sebi.gov.in) The issue has been building for weeks. On March 20, 2026, The Economic Times reported that tax authorities were pressing foreign portfolio investors to designate a local “representative assessee” so officials would have a named person in India to engage if there was a tax default. (economictimes.indiatimes.com) That report said the push came after the Jane Street episode and had already set off discussions among foreign portfolio investors, custodian banks and advisers over how much liability a nominated individual could inherit. The result was a bottleneck: funds needed a local point person, and many candidates wanted tax protection before signing on. (economictimes.indiatimes.com, economictimes.indiatimes.com) Foreign portfolio investors are offshore funds that buy Indian stocks, bonds and other securities through a registration route overseen by Sebi. The regulator’s May 30, 2024 master circular consolidated the operating rules for those investors, their designated depository participants and other intermediaries. (sebi.gov.in, sebi.gov.in) Sebi has also been trying to make that route easier to use. On March 23, 2026, the board approved a net settlement mechanism for foreign portfolio investors, a change aimed at reducing settlement-related frictions and improving capital efficiency. (taxmann.com, sebi.gov.in) The tax clarification request shows the next obstacle is not trading technology but legal accountability. Until the Central Board of Direct Taxes draws a clearer line between a compliance contact and a tax-liable agent, foreign funds and their advisers are likely to keep treating the authorised representative role cautiously. (economictimes.indiatimes.com, incometaxindia.gov.in)
