Foreign institutional investors (FIIs) allowed to invest up to 23 percent in commodity exchanges through the automatic route

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Policy for FDI in Commodity Exchange: The Department of Industrial Policy and Promotion has released the Consolidated FDI Policy Circular 1 of 201. Earlier the FDI investment cap in commodity excha­nges was fixed at 49 per cent, which required prior approval from the Foreign Investment Promotion Board (FIPB).Within this overall limit of 49%, investment by Registered FIIs, under the Portfolio Investment Scheme (PIS) was limited to 23% and investment under the FDI Scheme was limited to 26%. Under the Consolidated FDI Policy 2012, foreign institutional investors (FIIs) have been allowed to invest up to 23 percent in commodity exchanges through the automatic route. There would be no requirement to get Government approval for FII investment in commodity exchanges. However, the FDI investment in commodity exchanges would continue to be under the approval route.

 

This policy change has been aligned with the policy for foreign investment in commodity exchanges with that of other infrastructure companies in the securities markets, such as stock exchanges, depositories and clearing corporations.


Non Banking Finance Companies (NBFC)-clarification on ‘leasing’: The Policy for 2012 has clarified that the activity of ‘leasing and finance’, which is one among the eighteen NBFC activities, where induction of FDI is permitted, covers only ‘financial leases’ and not ‘operating leases’. This provision intends to clarify the coverage of the term ‘leasing and finance’, insofar as the NBFC sector is concerned.

 

Import of capital goods/ machinery/ equipment (including second-hand   machinery)-conversion to equity: The earlier FDI Policy permitted conversion to equity for import of capital goods/ machinery/equipment (including second-hand   machinery).  The New FDI Policy excludes the conversion of amount payable for the import of secondhand machinery into equity shares.

 

Clarification on investment by Foreign Institutional Investors (FIIs): The earlier FDI Policy allowed an FII to invest in the capital of an Indian Company under the Portfolio Investment Scheme which limited the individual holding of an FII to 10% of the capital of the company and the aggregate limit for FII investment to 24% of the capital of the company. This aggregate limit of 24% can be increased to the sectoral cap/statutory ceiling, as applicable, by the Indian Company concerned, through a resolution by its Board of Directors, followed by a special resolution to that effect by its General Body. It has been clarified that this would be subject to prior intimation to RBI

 

Investment by Foreign Venture Capital Investors (FVCIs): Vide A.P. (DIR Series) Circular No. 93 dated March 19, 2012, FVCIs were permitted by RBI to invest in the eligible securities (equity, equity linked instruments, debt, debt instruments, debentures of an IVCU or VCF, units of schemes / funds set up by a VCF) by way of private arrangement / purchase from a third party also, subject to  stipulated  terms and conditions. SEBI registered FVCIs  were also permitted to invest in securities on a recognized stock exchange subject to the provisions of the SEBI (FVCI) Regulations, 2000. The above changes brought about by RBI have now been incorporated in the New FDI Policy.

 

Investment by ‘Qualified Financial Investors (QFIs)’: The QFI regime was introduced by the Securities Exchange Board of India (“SEBI”) vide Circular No. CIR/IMD/FII&C/3/2012 and the RBI vide A.P. (DIR Series) Circular No. 66, on January 13, 2012 which permitted qualified foreign investors to invest (DPs), in equity shares of listed Indian companies as well as in equity shares of Indian companies which are offered to public in India in terms of the relevant and applicable SEBI guidelines/regulations. QFls have also been permitted to acquire equity shares by way of right shares, bonus shares or equity shares, on account of stock split/consolidation or equity shares on account of amalgamation, demerger or such corporate actions, subject to the prescribed investment limits. These provisions have now been incorporated under the FDI policy as well.

 

General permission for transfer of shares and convertible debentures: The liberalized policy on transfer of shares/ convertible debentures of companies engaged in the financial services sector has now been reflected under FDI policy.

 

FDI in single brand retail trading: The DIPP, vide Press Note No. 1 (2012 Series) dated January 10, 2012 had permitted 100% FDI in single brand retail trading under the Government route. These revised provisions of Press Note 1(2012 Series) dated January 10, 2012 and Press Note 3 of 2011, dated November 8, 2012, have been incorporated in the Circular 1 OF 2012.

 

FDI in pharmaceutical sector: The provisions of the Press Note No. 3 (2011 Series) issued by the DIPP, whereby FDI in existing pharmaceutical companies was shifted from the automatic route to the government route has been incorporated in the new FDI policy.

 

Deductors to Issue TDS certificate in Form No. 16A generated through TIN central system and downloaded from the TIN website with a unique TDS certificate number

 

Issue of TDS Certificate in Form No. 16A downloaded from the TIN website: To strengthen the administration of the issue of TDS and for proper administration of the Act the Central Board of Direct Taxes has in exercise of powers under section 119 of the Act, decided the following:

 

1. All deductors (including government deductors who deposit TDS in the Central Government Account through book entry) shall Issue TDS certificate in Form No. 16A generated through TIN central system and which is downloaded from the TIN website with a unique TDS certificate number in respect of all sums deducted on or after the 1st day of April, 2012 under any of the provisions of Chapter-XVII-B other than section 192.

 

2, The deductor, issuing the TDS certificate in Form No.16A by downloading from the TIN website shall authenticate such TDS certificate by either using digital signature or manual signature.

 

3. Where the deduction has been done between 1st April, 2011 and 31st March, 2012 and the deductor being other than a company/bank or banking Institution/a cooperative society engaged in carrying the business of banking and who do not issue the TDS Certificate in Form No.16A by downloading from the TIN website shall authenticate such TDS certificate in Form No.16A by manual signature only.

 

4. The Director General of Income-tax (Systems) shall specify the procedure, formats and standards for the purpose of issuance of TDS certificate in Form No.16A which is downloaded from the TIN website and shall be responsible for the day-to-day administration in relation to the procedure, formats and standards for issuance of TDS certificate in Form No.16A in electronic form.

 

5. TDS certificate issued in Form No. 16A by the deductors issued in the prescribed procedure, format and standards specified by the Director General of Income-tax (Systems) shall only be treated as a valid TDS certificate in Form No. 16A for the purpose of section 203 of the Act read with Rule 31 of the Rules.

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