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FATCA Leads to Stricter Reporting and More Taxation for Non-U.S. Mutual Funds

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By: Tracie Frost

In July we reported that India and the United States signed an agreement to implement the Foreign Account Tax Compliance Act (FATCA). The agreement is designed to increase transparency between the two nations on tax matters and took effect September 30, 2015.  We are now seeing the results of this agreement on U.S. residents and Green card holders who own Indian or other non-U.S. mutual funds.   

Mutual funds in India appear to be a tax-conscious investment vehicle because in India dividends are tax free up to U.S. $15,000, and long term capital gains on equity and mutual funds are also tax free. However, for Indian Americans, Non-Resident Indians, and Americans living and working in India, the U.S. tax consequences of Indian mutual fund ownership far over-ride the benefits. Because the United States levies tax on the world-wide income of U.S. residents and citizens, income from non-U.S. mutual funds, which are considered Passive Foreign Investment Companies, is taxed in the U.S. under the U.S. tax regime and at U.S. rates.

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Reducing the Risks Posed by Legislative and Judicial Actions in India

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By: Siddhartha Thyagarajan

Recent legislative and judicial actions in India’s capital of Delhi have caused significant disruption to the establishment of businesses. In the past few weeks, Delhi has implemented two measures to combat the rising levels of pollution in the mega city. Both have influenced various facets of Delhi’s economy, were particularly harsh on certain businesses, and inadvertently punished consumers in the city. 

The plans were introduced with noble intentions, but affected business operations for numerous companies. Most of these companies were underprepared to cope with changes in Delhi’s economic landscape. This underlined the importance of preparation and adaptation for businesses that operate in India – companies that keep abreast of changes in the legislative and judicial space can mitigate the risks that their businesses face.

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India Regulatory Brief: Real Estate Act, 2016 in Effect, Single Window Clearance System for Drones, Satellite Phones

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Real Estate Bill comes into Effect on May 1

The long awaited Real Estate (Regulation and Development) Act (2016) came into force on May 1. After an eight year long process, the Ministry of Housing and Urban Poverty Alleviation (HUPA) was finally able to notify 69 of the total 92 sections of the Act on April 27. This sets in motion the operationalization of the rules and regulatory infrastructure required by the act.

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How to Establish a Startup in India

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By: Melissa Cyrill

A host of incentives have been unveiled by the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) government that seek to promote the growth of startups in India. Economic goals are at the core of the government’s reforms, which include ease of doing business, job creation, promotion of skill development, and entrepreneurship. Towards this a national policy framework was launched in February 2016 called the Startup India Action Plan.

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India Targets Foreign Portfolio Investments for Ease of Doing Business

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By Dezan Shira & Associates
Editor: Tracie Frost

The Indian rules for foreign portfolio investments (FPIs) have undergone several regulatory changes designed to ease investment in the last few years.  FPIs primarily consist of securities and other financial assets passively held by foreign investors, generally for short-term speculation. Foreign portfolio investment differs from foreign direct investment in that it does not give the investor direct ownership of financial assets.

Prior to January 2014, FPIs were divided into foreign institutional investors, qualified foreign investors, and sub-accounts.  Responding to market pressure, in January 2014, the Securities and Exchange Board of India (SEBI) notified new rules which were designed to bring India in line with international norms and establish a simplified regulatory framework for foreign investors who fit the FPI framework.  The new rules merged foreign institutional investors, qualified foreign investors, and sub-accounts together to form the new foreign portfolio investor class.  The rules took effect on June 1, 2014.

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India Market Watch: Auto Sales to Increase, Hiring Rates Decline in IT, and Ikea Benefits from Less Regulations

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Strong Passenger Vehicle Sales Expected in 2016-2017

The passenger vehicle (PV) industry’s domestic volumes could grow by 8.5 to 9.5 percent, as per a report by the research and rating agency, ICRA. The projection is due to “the return of first-time buyers and replacement demand”. The optimistic outlook is further supported by the recent economic upturn, a favorable monsoon prediction, and the impact of the Seventh Pay Commission.

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City Spotlight: Pune

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By: Dezan Shira & Associates
Editor: Kabir Narang

Pune is the second largest city in the state of Maharashtra after the capital, Mumbai. It is also the ninth most populous city in India. Home to several educational institutes and universities that contribute to a skilled labor force, it also has a strong industrial belt dominated by manufacturing (process control equipment) and automotive plants. 

Pune fares well for both real estate developers and builders. According to the National Housing Bank (NHB) residex, a housing index that measures indirect wealth creation via movement of prices in the residential housing segment, Pune showed the highest growth in home prices in the January-March quarter of 2015, indicating healthy demand. The city has a rich cultural history, having once been the seat of the once-dominant Maratha Empire and a vibrant biodiversity, making it a popular tourist destination. It is also well connected to other parts of Maharashtra and India by road, rail, and air.

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India Market Watch: India’s Fuel Demand Jumps, New Solar Policy Expected, and E-Trading to Aid Farmers

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India’s Fuel Demand Grows in 2015-2016

Data released by the Ministry of Petroleum & Natural Gas shows India’s fuel consumption rose by 10.9 percent, from 165.5 million tons to 183.5 million tons, in the 2015-2016 financial year ending March 31. Breaking down the data, diesel consumption jumped 7.5 percent to reach 74.6 million tons and petrol sales increased by 14.5 percent to 21.8 million tons. Projections for 2016-2017 remain equally robust.

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