Budget 2016: Budget May Ease Rules For Offshore Fund Managers Moving To India

In a move to woo offshore fund managers to locate in India, the Union Budget 2016-17 is likely to relax conditions for them to avail of tax exemptions.

Budget 2015 had announced some exemptions by amending the permanent establishment (PE) norms. The rules were changed to the extent that mere presence of a fund manager in India does not constitute PE of the offshore fund. This implies these fund managers are exempt from corporate taxation in India.

"The present taxation structure has an in-built incentive for fund managers to operate from offshore locations. To encourage such offshore fund managers to relocate to India, I propose to modify the PE norms to the effect that mere presence of a fund manager in India will not constitute PE of the offshore funds resulting in adverse tax consequences," Finance Minister Arun Jaitley had said in his Budget 2016-17 speech last year.

However, these efforts have so far not been able to impress offshore fund managers like Citi, Morgan Stanley, JPMorgan and others, as conditions for availing of the tax exemptions are rather stiff.