Transparency in 'See Through' Rules: Private Equity in India

Modi government tampering at the edges to attract private equity investors. More needs to be done.

Economic Times reports that the Indian government is set to ease a few pre-set conditions for offshore fund managers to allow private equity investors to shift base to India without attracting a tax on capital gains by relaxing safe harbour rules, people familiar with the matter said. 

The government is likely to allow a 'see through' so that the 10 per cent limit on individual investors does not apply to special purpose vehicles and relax the arm's-length condition that allows only third party fund managers to rekindle investor interest in the scheme as it has failed to attract a single fund manager even eight months after announcing what is known as safe harbour rules, people in the know said. 

After finance minister Arun Jaitley had announced the outlines of safe harbour norms during his budget speech in February, the government had come out with some 15 conditions that the fund managers had to meet if they wished to shift their base to India. Fund managers and their tax consultants found many of those conditions restraining and potential trigger for litigations. 

Now the government plans to relax some of these clauses. A major change that the government is looking at this stage includes allowing a "look through" or a "see through" for the investors of the funds, a person close to the development said. 


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