Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 7

Investor compliance with the laws and regulations in the home countries of their investments should be part of their regulators' due diligence process. They, in turn, should be treated equitably in the home country of their investments especially in respect to their rights to shareholder benefits and concessionary arrangements under double tax agreements.

1.	Do domestic regulators monitor the procedures in place at their locally based cross-border custodians to assure compliance with the laws and regulations of the home countries of their investments?	No. The Securities and Exchange Board of India (SEBI) regulates locally-based cross border custodians. SEBI audits and monitors the compliance of local custodians with local rules and regulations. In addition, the Reserve Bank of India (RBI) also maintains oversight for foreign and local banks licensed to operate in India.
2.	What are the areas (e.g. benefits, investor compensation) where foreign investors are not treated in the same way as local investors?	Generally, foreign investors are treated at par with domestic investors. However, foreign investors (including FIIs) are subject to the following restrictions not imposed on local investors: FII aggregate ownership limits ranging from 24 to 49 percent (subject to shareholder approval) are imposed on listed companies. Public sector banks are subject to a 20 percent FII aggregate ownership limit. In addition, separate investment limits apply for Overseas Corporate Bodies (OCBs), Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs). All aggregate ownership limits are monitored by the Reserve Bank of India (RBI). Foreign investors are required to maintain Special Non-Resident Rupee Accounts to maintain INR balances. The account(s) are non-interest bearing and cannot be overdrawn. FIIs are not permitted to engage in short selling, turnaround trading nor securities borrowing. FIIs are required to appoint a local chartered accountant for the purpose of completing tax filings per the requirements of the Income Tax Act of 1961. All tax obligations must be fulfilled in order repatriate sale proceeds and income.
3.	Can sales proceeds and income be repatriated without any restrictions?	Yes, but subject to compliance with certain rules and regulations: Sales proceeds and income may only be repatriated under the condition that all outstanding tax on capital gains, dividends, and interest has been paid. As stipulated in the Income Tax Act, Section 115 AD, payment of tax must be confirmed to the RBI through presentation of a certificate presented by the chartered accountant (appointed in the local market by the FII) and bank check drawn on the FII's account at the local custodian.
4.	Are double tax agreements simple to apply, and do foreign investors receive promptly their full entitlement to dividends and interest payments?	Yes. Double taxation agreements are simple to apply, and their validity has been upheld in recent court rulings. The gradual transition to a dematerialized environment in India has greatly increased the proportion of entitlements credited to investors in a prompt manner, with the majority of investors receiving entitlements within 10 days of the Annual General Meeting (AGM) and the remainder by the stipulated deadline of 30 days.