New Indian law to protect foreign investors to exclude tax demands – documents

By Ritu,

Capital Sands

New legislation will improve protection for foreign investors in India by offering relief from possible policy changes but will uphold the state’s right to tax them, according to its draft and government documents seen by Reuters.

The bill also attempts to upgrade India’s investment climate and boost foreign investment by setting up new adjudicating authorities to swiftly resolve disputes. It is part of India’s efforts to become a $5 trillion economy by 2024, from around $2.7 trillion currently, the documents said.

But the draft text of the new law dated Nov. 15 does not cover demands related to enforcement of tax obligations, a critical area of concern for foreign investors.

A separate internal government document which analyses the draft law noted that taxation issues were of “great interest” to investors and excluding it from the law’s purview could reduce the proposal’s intent to boost their comfort level.

Nevertheless, the document defended the exclusion, saying “the power to tax is an integral part of the state’s police powers even recognized in international law”.

The bill proposes to cover a wide range of foreign investors, including investments from sovereign wealth funds, pension funds and insurance funds, the government document said.

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