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FPIs to receive sale proceeds on T+1 with streamlined tax certificate issuance
SEBI has introduced measures to speed up the availability of sale proceeds for foreign portfolio investors (FPIs), bringing them to par with domestic institutional investors. This move enhances operational efficiency and responds to concerns raised by FPIs.
FPIs previously reported delays in their access to sale proceeds beyond the standard ‘T+1’ settlement date. These delays were primarily due to the erstwhile process adopted to obtain tax clearance on their net sale proceeds to ensure compliance with FEMA Regulations.
Under the new system, effective from September 9, 2024, tax certificates for FPI sale trades executed on ‘T’ day are issued by tax consultants by 9:00 AM IST on the ‘T+1’ day. This allows FPIs to access sale proceeds, either for repatriation or for reinvestment, on the same T+1 day. It is broadly estimated that efficiency gains on account of these revised processes would be around Rs 2000 crore p.a.
SEBI introduces Liquidity Window to boost early redemption of debt securities
SEBI has introduced a Liquidity Window facility for debt securities, allowing issuers to offer put options for investor redemption prior to the maturity date. This framework, governed by Regulation 15 of the SEBI (NCS) Regulations, 2021, aims to enhance liquidity in the corporate bond market, especially for retail investors. The Liquidity Window facility can be provided only for prospective issuances of debt securities through a public issue process or on a private placement basis.
The issuer must ensure that the Liquidity Window facility provided has the prior approval of its Board of Directors. The issuer must specify the eligibility of investors who can avail of the Liquidity Window facility, i.e. whether the facility shall be available to all investors in debt securities or only to retail investors in debt securities.
Further, the issuer must provide this facility only after the expiry of one year from the date of the issuance of the debt securities. Re-issuances must not be permitted under the ISINs in which the liquidity window facility is offered. The issuer may designate one of the stock exchanges as the ‘Designated Stock Exchange’ for the purpose of a liquidity window facility.
Also, the liquidity window must be kept open for 3 working days. The liquidity window may be operated on a monthly/quarterly basis at the discretion of the issuer. The schedule of the liquidity window must be disclosed upfront in the offer document. The circular shall be applicable on and from November 1, 2024.
HC upheld Compounding fee imposed on OCI cardholder for purchasing agricultural land in India without RBI’s permission
Martin Jebarathna Doss Antonisamy v. Reserve Bank of India - [2024] 167 taxmann.com 353 (HC - Delhi)
In the instant case, the petitioner was a citizen of United State of America and Overseas Citizen of India (OCI) cardholder and, evidently, he purchased vast tracks of agricultural property in Tamil Nadu, without obtaining prior permission from RBI, as required under Regulation 8 of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000.
Thus, there was a contravention of FEMA. The Respondent/RBI inter alia directed him to transfer the acquired property immediately to a person resident in India, who should be a citizen of India and eligible under FEMA, 1999 for the acquisition of the said property.
The petitioner was also informed that he should approach the respondent for compounding of contravention within one month from the date of transfer of immovable property under reference. In the said backdrop, compounding proceedings were initiated, and vide impugned order, a sum of Rs. 41 lakhs had been levied as a compounding fee in terms of section 13 of the FEMA read with the relevant rules.
The petitioner filed an instant petition for quashing of the compounding order on the ground that he bonafide purchased the said agricultural property and, despite complying with directions of the respondent, thereby selling proprieties to an Indian citizen, had been levied an exorbitant penalty without any basis.
It was noted that computation had been done in accordance with the prescribed Master Direction-Compounding of Contravention under FEMA, 1999. Further, there was nothing pointed out by the petitioner so as to challenge the manner in which computation had been done.
The High Court held that there was no denial that before passing the impugned order, an opportunity of hearing was afforded; however, it was not availed. Thus, the decision by the respondent could not be faulted on any legally sustained grounds. In view of the above, the instant writ petition was to be dismissed.
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