These clarifications are set to provide directions to investors from countries that share land borders with India and those that enter using Hong Kong as a base. Investors have flagged several issues related to Press Note (PN) 3 of 2020 that mandates prior government approval even in sectors on the automatic route if the beneficial owner of an investment is situated in one of these countries.
New Delhi, in May, updated the standard operating procedure (SOP) for processing FDI applications from these geographies, identifying rare earth magnets and printed circuit boards among 40 sub-sectors for speedy clearance within 60 days.
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Investors are required to provide details of shareholding pattern, beneficial owners, organisation and group structures, promoters, board composition and key managerial personnel, along with corresponding citizenship status, and details of control rights in the reporting framework.
One industry executive said though the timeline is fixed at 60 days, the amount of paperwork required is substantial, with investors getting several queries that prolong the process of application itself.
This came after the government allowed foreign companies having a Chinese or Hong Kong shareholding of up to 10% (or non-controlling stake) to invest in India under the automatic route.Also read: ITR filing deadline: Income Tax Department asks business, professional taxpayers to file returns by August 31
Industry experts, however, said that while the PN2 provided some relief, particularly to private equity players, some issues still remain.
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