Foreign investors must show source of funds
Foreign companies and their affiliates, planning to invest in India will have to disclose details of their corporate structure, the source of funds and complete financial statements of the previous three years.business Updated: Dec 02, 2009 20:23 IST
Foreign companies and their affiliates, planning to invest in India will have to disclose details of their corporate structure, the source of funds and complete financial statements of the previous three years.
These details will have to be submitted along with their applications for approval to the finance ministry and the Reserve Bank of India (RBI).
“Details of ultimate parent company of the investor… representation of the corporate structure depicting the relationship between the parent company and investee company have to be submitted,” a government official, who did not wish to be identified, said.
The revenue department has written to the foreign investment promotion (FIPB) on November 27 to take up the matter on priority and make submission of these details compulsory.
“Details of the source of funds including the name of the persons providing these funds and the flow of funds from the original investor to the investee company will have to be provided,” the official said.
These are part of the measures by the government to check tax evasion by firms.
“Our field formations have informed that while examining the foreign investments from taxation angle, the investee companies are reluctant to give any financial details,” the letter said.
The investee companies cite that they have approval of FIPB and RBI and the money is coming by cheques and hence the genuineness of the money should not be doubted. “This leads to additions by assessing officers for lack of documentation and leads to litigation,” it said.
Cumulative amount of FDI inflows between August 1991 and September 2009 has touched Rs 5,28,108 crore or $121 billion. In the first six months (April to September 2009) India has received FDI worth Rs 74,378 crore or $15.31 billion.