Mumbai: Two industry associations, representing foreign institutional investors, have jointly written to the Finance Minister Pranab Mukherjee expressing concern over some provisions of the Finance Bill 2012 that could adversely affect global investments in India's capital market.
The industry bodies have expressed apprehension over provisions relating to the taxation of indirect transfer of assets and the "broadly worded" general anti-avoidance rule in the letter.
The associations expressed fear that foreign institutional investors would choose to sell their India investments considering as unacceptable the tax risks involved if these uncertainties are not resolved quickly.
"Such a disorderly dissolution of large positions held by these overseas investors could seriously disrupt the Indian capital markets," the letter written by the US-based Securities Industry and Financial Markets' Association and Hong Kong-based Asia Securities Industry & Financial Markets' Association said.
The norms are seen as having huge tax implications for foreign institutional investors having exposure in Indian share markets.
"Global investors who do not qualify as FIIs or Qualified Foreign Investors rely on these institutions (registered FIIs) to invest in the Indian capital markets. FIIs fear that the new tax rules could subject this foreign investment to double or triple taxation. Such onerous taxation – or even the risk of such taxation - could threaten this important source of capital ...," the letter said.