Tax haven FDI to face tough scrutiny
Based on a recommendation from the National Security Council (NSC), the finance ministry will trace the parentage of investors from these low-tax jurisdictions three steps back like in sensitive sectors. The firms will have to specify such parentage and give details of source of funds and give clear information of their organisational structure.
Currently, foreign firms wanting to invest in sensitive sectors like telecom, aviation and defence face intense government scrutiny. This is meant to prevent flow of black money and terror funds into the country. In other sectors, investors need to furnish only their name, bank account details and address to the Reserve Bank of India.
“Tax havens are always a suspect as several companies from third countries and from India use them for routing investments to India and claim tax benefits. We want to ensure that these low-tax jurisdictions are not used for routing black money into the country. It is felt that additional checks are required to achieve this objective,” said a government official privy to the development.
Sources said that the extra scrutiny will be first made applicable in case of investment proposals from tax havens that need prior government approval. Subsequently, even those investments from these jurisdictions which are put on the automatic route will be brought under the new system for additional information gathering.
The checks will include investors being
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