Financial Daily from THE HINDU group of publications
Thursday, Oct 28, 2004
Industry & Economy - Overseas Investments
US fund managers' body to help investors keen on India
Kolkata , Oct. 27
INVESTMENT Company Institute, the apex body formed by fund managers in the US, has started working overtime for members who are seeking to increase their allocation to India.
ICI, for starters, has supported the recently-introduced norms on capital gains tax and securities transaction tax, describing them as legislations that will improve the returns generated by the funds that invest in India.
The ICI move may be seen in the context of the passage of the law that reduces or eliminates capital gains taxes and imposes a new tax on certain transactions.
"That overseas funds are looking at India for investing is not big news any more. But the fact that they (ICI) have adopted this position is not known to all," said a senior source in the domestic asset management industry.
A number of players in India have overseas parents, and the ICI move might interest them and others who wish to have a local presence, he added.
The US body (somewhat similar to the Association of Mutual Funds in India) has provided a `background' by referring to the recent amendment in the Income-Tax Act, especially to the tax rates that apply to capital gains arising from the transfer of equity shares on a recognised stock exchange and units of equity-oriented funds.
The new Act eliminates tax on long-term capital gains, reduces tax on short-term gains to ten per cent and imposes a securities transaction tax (the amount of which varies based on the nature of the security exchanged and the mode of settlement of the trade).
ICI, it may be mentioned here, already advocates lowering of the barriers that prevent US asset management outfits from marketing their products and services in other nations. Its work, it is claimed, is aimed at "achieving a true cross-border market" for investment companies in Europe.
It also tries to ensure that such companies can be used as funding vehicles in the defined-contribution markets in Europe and Japan. Further, ICI seeks to reduce barriers to US advisers trying to offer their products in Asian countries.
ICI, for instance, has recently commended China for adopting regulations that, for the first time, allow Chinese insurance companies to invest their foreign currency assets offshore and to appoint foreign fund managers to manage their overseas allocations.
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