Monthly Archives: August 2020

[vc_row][vc_column][vc_column_text]Central Board of Direct Taxes vide its circular dated 08.05.2020, provided clarification in respect of residency under Section 6 of the Income Tax Act 1961, regarding the Residential  status of those person who could not leave Indian territory due to the lockdown and those who were quarantined due to the Preventive measures. This has been brought forward to avoid genuine hardship to the Public.

The Central Board of Direct Taxes in a circular said the decision has been taken following various representations in the matter, as concerns were expressed that a prolonged stay in the country may make them a resident of India under Section 6 of the Income Tax Act, 1961

It has been clarified in the circular that following relaxation shall be given in calculation of number of days for the purpose of treating a person as resident of India:

Those who have been unable to leave India on or before March 31, 2020.Their period of stay from March 22, 2020 to March 31, 2020, shall not be taken into account.

Those who have been quarantined in India on account of the novel coronavirus (or COVID-19) on or after March 1, 2020 and have departed on evacuation flights on or before March 3e1, 2020. Their period of stay from the beginning of quarantine to the date of departure of March 31, as the case may be, shall not be taken into account.

Those who departed on an evacuation flight on or before March 31, 2020. Their period od stay in India from March 22, 2020 to their date of departure shall not be taken into account.

This circular of Govt of India has brought relief to many of the individuals who have been stuck up due to the Covid-19 outbreak.[/vc_column_text][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]The Reserve Bank today tightened reporting norms for the Liberalised Remittance Scheme (LRS) under which an individual can transfer up to USD 2,50,000 abroad in a year.

The LRS transactions are currently permitted by banks based on the declaration made by the remitter.

The monitoring of adherence to the limit is confined to obtaining such a declaration without independent verification, in the absence of a reliable source of information.

“In order to improve monitoring and also to ensure compliance with the LRS limits, it has been decided to put in place a daily reporting system by AD banks of transactions undertaken by individuals under LRS, which will be accessible to all the other ADs,” the RBI said in a notification.

Now banks will be required to upload daily transaction-wise information undertaken by them under LRS.

Under the LRS, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year for any permissible current or capital account transaction or a combination of both.

Individuals can avail of foreign exchange facility for the purposes within the limit of USD 2,50,000 only.

The scheme was introduced on February 4, 2004, with a limit of USD 25,000.

The LRS limit has been revised in stages consistent with prevailing macro and micro-economic conditions (Source – PTI, New India Express) .[/vc_column_text][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]Will is the legal declaration of a person’s intention, which he/ she wishes to be performed after his/her death and once the Will is made by the testator/ testatrix, it can only be revoked during his/her lifetime.

‘Probate’ means the copy of a Will certified under the seal of a court of competent jurisdiction with a grant of administration of the estate of the testator. A probate can be granted only to the executor appointed under the Will. Further, a probate is essential if the Will is for immovable assets in multiple states.

Caveat a Latin term means ‘let a person beware’. In law, it can be explained as a notice or a precaution exercise (generally in probate cases) that a certain matter is not heard, judgement is not passed, order is not issued without hearing the person who has filed the caveat. It can be made in an application already made or which is supposed to be made in future.

 

The importance of a ‘Probate Caveat’

A probate caveat is a document that is filed in court to prevent the proposed executors or administrators of a deceased person’s estate from getting permission to administer the estate assets.

A probate caveat is used to challenge a Will itself. For example, where someone believes that the Will was forged or was not written and approved by the deceased person.

If someone files a Probate Caveat in the wrong circumstances, the court may order that person to pay the costs incurred by the other party in dealing with the caveat.

A probate caveat must be filed shortly after a deceased person’s death and before probate are granted by the court. If someone has concerns about someone’s Will, it is very important that person should seek legal advice as soon as possible after the testator/ testatrix dies, so as to make sure that person starts the proceedings within time and on the correct basis.

Necessity of a Probate in certain cases: As per the provisions of the Indian Succession Act, 1925 (“Succession Act”) the provisions of testamentary succession are applicable to the Will if:

Made by Hindu, Buddhist, Sikh or Jain on or after the first day of September, 1870, within the territories which at the date were subject to the Lieutenant-Governor of Bengal or within the local limits of the ordinary original civil jurisdiction of the High Courts of Judicature at Madras and Bombay or

(ii) Made the Will outside those territories and limits, so far as relates to immovable property situate within those territories or limits.

Further, no right as an executor or legatee can be established in any Court of Justice, unless a Court of competent jurisdiction in India has granted Probate of the Will under which the right is claimed. However, this provision applies only to the cases, which are referred above. Therefore, a Probate of Will is compulsorily required, only if the Will is made in any one of the aforesaid two cases, otherwise, it is not compulsorily to Probate the Will.

Even otherwise, it would be advisable to seek Probate of Will in case of:

(i) When there are problems with an existing Will

(ii) When the beneficiaries have predeceased the testator and such other cases

Probate of a Will

It is pertinent to understand the process of obtaining the Probate of a Will. A Probate is granted by the High Court with the court seal and a copy of the Will attached. For seeking a Probate, the executor of the Will, as a Petitioner is required to file the petition (after making payment of applicable court fees depending upon the value of the assets) before the competent court (a pecuniary jurisdiction may require a higher court to issue a probate for high-value immovable assets) through an advocate. Thereafter, the court usually asks the Petitioner to establish the proof of death of the testator, as well as proof that the Will has been validly executed by the testator, and that it is the last Will and testament of the deceased.

After receiving the petition for a Probate, the court issues a notice to the next of kind of the deceased to file objections, if any, to the granting of the probate and it also directs the publication of a citation on board to notify the general public. If there is no objection, on the other hand, if the next of kin of the deceased files their respective consent to the grant of Probate, then court grants the Probate, however, if the next of kin of the deceased files their respective objections to the grant of Probate, then the Probate Petition becomes the testamentary suit, to enable parties to lead evidence in the matter.

 

Challenges to Wills and probate claims:

 

It can be difficult task to challenge a Will. In most of the cases, courts stick stringently to Wills, since the testator is no longer there to defend himself. However, if you have an interest in the Will, you can challenge it, and if you are successful in convincing the court, then the Will can be voided in its entirety or in part. It is advisable to seek an advice from a practicing lawyer before challenging the Will, since the law surrounding challenges to a Will is complicated, plus, the facts of each case are unique. The Will can be challenged on any of the following grounds:

Lack of due execution: A valid Will has to be in writing and signed by the testator in the presence of two witnesses, who must also attest the Will. If the process is not followed to the hilt, the Will can be challenged in the court of law.

Lack of testamentary intention: Here, the person has to prove that the testator had no intention to make a Will, however, this plea is rarely used, as it is difficult to prove.

Lack of testamentary capacity: The law requires that people above 18 years can make a Will. Adults are presumed to have a testamentary capacity, and therefore, the Will can be challenged on the basis of senility, dementia, insanity, or that the testator was under the influence of a substance, or in some other way lacked the mental capacity to make a Will. Basically, to challenge a Will based on mental capacity, the challenger of Will must show that the testator (the person who created the will) did not understand the consequences of making the will at the time of its creation.

Lack of knowledge or approval: Challenger of Will can take the ground that the testator did not, in fact, know what was in the Will when he signed it.

Undue influence: Challenger of Will can challenge a Will by showing that the Will was procured by fraud, forgery, or undue influence, i.e. lack of own free will or without adequate attention as to the consequences of bequests so made under the Will.

Fraud or forgery: The burden of proof would be on the challenger of the Will to establish that the Will was forged (not signed by the testator) or was made as a result of fraudulent act.

Claims by family: A family member can challenge a Will on the grounds that they were not provided for adequately in the Will.

Revocation of earlier Will: A Will, although registered can be challenged in the court of law. The mere fact that a Will has been registered (not mandatory under the law to register the Will) will not, by itself, be sufficient to dispel all suspicions regarding it. A registered Will may not be the last testament. A new Will made, even if unregistered, if valid, will trump the registered Will. If there are any suspicious facts, the court will scrutinize the Will even if it is registered

 

Creating a Testamentary Trust

To create a testamentary trust in a Will, the testator must designate a trustee and specify the beneficiaries. As mentioned above, a testamentary trust comes into effect not until the testator dies. Thus, the testamentary trust must be contained in the testator last (final) Will, so the trust can be created upon the testator death. A testamentary trust is not automatically created upon the demise of the testator. While other types of trusts may avoid probate, a testamentary trust must go through the probate process. The testamentary trust will come into effect upon the completion of this process. A trustee, chosen by the testator, will manage the trust property or funds in the trust until the trust is dissolved and the same is distributed to the beneficiaries

 

Grounds under which a Will after a Probate can be contested

 

The Succession Act provides for certain grounds on which a Probate of a Will may be revoked, however such revocation can only be effected if the person challenging the Probate is able to convince the competent court that it is necessary to revoke the Probate ‘for just cause’. Further for challenge of a probate, the law of limitation must also be abided by, as probate operates as a ‘right in rem’ granted by the competent court, operates from the date of grant of the probate, therefore a challenge which is hopelessly barred by limitation cannot be entertained by any court of law. Further, an order of revocation of the Probate would operate prospectively and such revocation does not obliterate bona fide transactions entered into by the executor during the pendency of the Probate. The challenger can challenge the Probate of Will on the following grounds:

1. The proceedings to obtain the grant of Probate were defective in substance; or
2. The grant of Probate was obtained fraudulently by making a false suggestion, or suggestion, or by concealing from the court something material to the case; or
3. The grant of Probate was obtained by means of an untrue allegation of a fact essential in point of law to justify the grant, though such allegation was made in ignorance or inadvertently; or
4. The grant of Probate has become useless and inoperative through circumstances; or
5. The person to whom the grant of Probate was made has willfully and without reasonable cause omitted to exhibit an inventory or account in accordance with the provisions of Chapter VII of this Part, or has exhibited under that Chapter an inventory or account which is untrue in a material respect

 

Conclusion

Seeking grant of Probate of Will is a time consuming task to be complied by the executor of the Will of the testator, for which, the testator also has to spend time and money towards payment of court fees depending upon value of assets bequeathed under the Will. However, as stated above, it is compulsory to seek grant of Probate of Will only in certain cases, whereas, it is not compulsory to seek grant of Probate of Will in other cases.[/vc_column_text][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]In the past few years, hundreds of non-resident Indians (NRIs) have been either summoned or served notices by the Income Tax (I-T) Department and Enforcement Directorate (ED) — sparking fear and unease among many in the diaspora who were asked to explain assets and earnings for certain years.

Now, many have found a ploy to escape the glare of the Indian authorities and avoid the trouble that follows. It’s simple: they are changing the Indian addresses mentioned in their passports to their current addresses in countries where they reside. This helps to establish and reinforce their tax residency status in the country concerned and stops the automatic flow of financial information to the government of another country (India).

A large number of individuals named in the Paradise and Panama papers happen to be NRIs.

The new address is recorded in their documents with overseas banks where they have the accounts — either in the names of family members or, companies and offshore trusts. Banks are the prime source of information on fund movements and assets for the Indian government. However, this source can dry up with the change in address. Overseas banks do not share information on their ‘tax residents’ with authorities in other countries.

As long as the account holder’s address in a bank’s records is a local one, the bank passes on information only to the government of that country (and not India).

It’s a loophole in the systematic information sharing arrangements that countries struck with each other to access data on undisclosed assets and produce evidence of tax evasion.

Resident Indians pay tax in India on their earnings at home as well as abroad, but the tax NRIs pay to the Indian government is only on their income in India.

“If an NRI is paying tax in a particular country, he or she is in a position to change the address in the passport to the present address in the foreign country. He is recognized as a tax resident of that country. This interrupts any exchange of information under Common Reporting Standard-…Many NRIs, I believe, have done this to avoid the inconvenience of responding to the I-T and other departments

As per changes in international tax legislations, financial institutions worldwide are required to report customers’ account information based on tax residence to the local tax authorities where the financials accounts are held

The general requirement for determining tax residency is self certification of either passport, national identity card, driving license or other supporting documents such as utility, credit card bills. For an NRI, tax residence generally relates to the country where the person lives and works or where she has, or has had, the obligation to file a tax return or is subject to income tax. In the CRS forms, in which bank account holders have to share their details, many NRIs do not disclose their tax position in India but only mention the country of stay where they are tax residents.

For instance, Belgium taxes residents following a source-based taxation policy, i.e., the place where the taxpayer manages wealth, lives and works. According to the Belgium financial institution format for CRS declaration, one can provide Permanent Residency card number and local address in the form and remain silent on the Indian tax position.

“This results in them being out of CRS for Indian Authorities. It’s similar in the UK which follows a domicile-based taxation i.e. on number of days a resident stays in the country. Indian Authorities may not have possibly received any information about NRIs with local addresses

Brokers, certain collective investment vehicles, and some insurance companies – besides banks – have to report under CRS. In case of trusts, CRS rules require looking through the trusts to report the names of ultimate beneficial owners or individuals who control the trusts. A CBDT spokesperson did not comment on subject.[/vc_column_text][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]A large number of Indians work outside India or have businesses outside India. They visit India, at times for an extended period, or after a stint abroad, even return to India. Tax Liability in India in such cases depends on whether a person is a resident or a non-resident. If an individual is not a resident in India, only then is the income that is earned in India or which is received in India is taxable in India. So, to avoid world income becoming taxable in India, one must be careful about the period of stay in India.

The Finance Minister, in the Budget that she presented last month, has proposed three changes to the rules for deciding the residential status of an individual.

An individual becomes a resident in India if he satisfies any one of the following conditions: (i) he has stayed in India for 182 days or more in the financial year; or (ii) he has stayed in India for 60 days or more in the financial year and his total stay in the earlier four financial years is for 365 days or more.

However, in the case of Indian citizens and Persons of Indian Origin (PIO), the second condition is relaxed. The relaxation enables them to stay longer in India without becoming liable to tax on their world income. Presently, if an Indian citizen or a PIO visiting India stays in India for less than 182 days, he/she retains his status as a non-resident. The Finance Bill proposes to reduce this period of 182 days to 120 days.  As a result, now, if an Indian citizen or a PIO stays in India for 120 days or more while visiting India, he/she will become a resident of India. This may make his/her world income chargeable to tax in India.

The second change proposed is an anti-abuse measure. Some persons, particularly high net worth Individuals (HNIs) manage their stay in various countries in such a way that they do not become residents of any country for tax purposes. They are classified as ‘stateless Indian citizens.’ The Finance Bill proposes to introduce a new provision for such stateless Indian citizens. Under the new proposal, if an Indian citizen is not liable to tax in any country on account of his/her stay or domicile, he/she will be considered as a resident in India. As a result, she/he may become liable to pay tax in India on her/his world income.

This proposal created a genuine fear that Indians working in countries such as the UAE, which do not levy income tax, will be deemed as residents. In such a case, they will have to pay tax in India on their salaries earned abroad. The government immediately issued a press release stating `The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. In some section of the media the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct.’ The government’s communication also stated that in the case of Indian citizens who become deemed residents of India under this proposed provision, income earned outside India by them shall not be taxed in India unless it is derived from an Indian business or profession and, if required, necessary clarification will be incorporated in the law. Let us hope that it is done when the Finance Bill is passed.

While the two proposals considered above are restrictive, the third proposal relaxes and simplifies the criteria to become a `Not Ordinary Resident’ (NOR). In the case of an NOR, although he/she is a resident, his/her foreign income is not chargeable to tax in India unless it is from a business controlled from India or profession set up in India. This provision is particularly helpful to returning Indians. It gives them time to arrange their affairs before their foreign income becomes taxable in India.

Presently, to become an NOR, a person must be a non-resident for at least nine out of the 10 previous financial years or his/her total stay in India should not be more than 730 days in the preceding seven financial years. It is now proposed that an individual will be an NOR if he/she has been non-resident for at least seven years out of the 10 preceding financial years. The other condition of `not more than 730 days stay’ in India is being deleted. Now a returning Indian, who has been a non-resident for 10 years or more, will be an NOR for four years and his/her foreign income will not be taxed when he/she is an NOR. A welcome change, indeed.[/vc_column_text][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]External Affairs Minister Sushma Swaraj has ruled out any new window of opportunity for NRIs or people of Indian-origin to deposit their high value Indian currency which was declared illegal after the demonetisation policy, a statement said today.

Swaraj made these remarks during her interaction with a delegation of Global Organisation for People of Indian Origin (GOPIO) during her trip to New York last week, a media statement said.   “Swaraj informed that the government had provided the time window for Non-Resident Indians (NRIs) who are Indian citizens to deposit their currencies earlier.

However, that window was not open for Diaspora Indians with foreign citizenship and the government would not be able to provide another such chance,” the GOPIO statement said.

Prime Minister Narendra Modi announced his demonetisation policy on November 8 last year, banning old currency notes of Rs 500 and Rs 1000 denomination.

According to GOPIO, overseas citizens of India and people of Indian-origin are still holding demonetised currencies as the Reserve Bank of India did not allow them to deposit them.

“Diaspora Indians have close to Rs 7,500 crores still lying with them in small amounts. What should the NRIs do with the old currencies?” GOPIO asked.

During the meeting, GOPIO delegation said that NRIs did not have Aadhaar card for linking with their bank accounts.

“Swaraj clarified that NRIs won’t require Aadhaar card to operate their bank accounts,” it said.

GOPIO suggested that Indians citizen living anywhere in the world have an Aadhaar card similar to all US citizens having a social security number, whether staying in America or outside.

It complimented Swaraj and the Indian Missions worldwide for their pro-active role in helping Indians living outside India in time of distress, the statement said.

“However, as more Middle East NRIs are returning home, we need to develop programmes to help resettle them. Swaraj said that there are many programmes for skills development as well as money available from different ministries for starting a business or technology related outfit,” the statement added.

GOPIO has offered to be facilitator between the returned NRIs and the government Consul General of India in New York Sandeep Chakravorty also participated in the meeting.[/vc_column_text][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]Sub-section (1) of section 6 of the Act provides for situations in which an individual shall be resident in India in a previous year.

Clause (c) thereof provides that the individual shall be Indian resident in a year, if he,-

(i) has been in India for an overall period of 365 days or more within four years preceding that year, and

(ii) is in India for an overall period of 60 days or more in that year.

Clause (b) of Explanation 1 of said sub-section provides that an Indian citizen or a person of Indian origin shall be Indian resident if he is in India for 182 days instead of 60 days in that year. This provision provides relaxation to an Indian citizen or a person of Indian origin allowing them to visit India for longer duration without becoming resident of India.

Instances have come to notice where period of 182 days specified in respect of an Indian citizen or person of Indian origin visiting India during the year, is being misused. Individuals, who are actually carrying out substantial economic activities from India, manage their period of stay in India, so as to remain a non-resident in perpetuity and not be required to declare their global income in India.

Sub-section (6) of the said section provides for situations in which a person shall be “not ordinarily resident” in a previous year.

Sub-section (1) of section 6 of the Act provides for situations in which an individual shall be resident in India in a previous year.

Clause (c) thereof provides that the individual shall be Indian resident in a year, if he,-

(i) has been in India for an overall period of 365 days or more within four years preceding that year, and

(ii) is in India for an overall period of 60 days or more in that year.

Clause (b) of Explanation 1 of said sub-section provides that an Indian citizen or a person of Indian origin shall be Indian resident if he is in India for 182 days instead of 60 days in that year. This provision provides relaxation to an Indian citizen or a person of Indian origin allowing them to visit India for longer duration without becoming resident of India.

Instances have come to notice where period of 182 days specified in respect of an Indian citizen or person of Indian origin visiting India during the year, is being misused. Individuals, who are actually carrying out substantial economic activities from India, manage their period of stay in India, so as to remain a non-resident in perpetuity and not be required to declare their global income in India.

Sub-section (6) of the said section provides for situations in which a person shall be “not ordinarily resident” in a previous year.

Clause (a) thereof provides that if the person is an individual who has been non-resident in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for an overall period of 729 days or less.

Clause (b) thereof contains similar provision for the HUF. This category of persons has been carved out essentially to ensure that a non-resident is not suddenly faced with the compliance requirement of a resident, merely because he spends more than specified number of days in India during a particular year.

Such a circumstance is certainly not desirable; particularly in the light of current development in the global tax environment where avenues for double non-taxation are being systematically closed. In the light of above, it is proposed that-

It is proposed that exception provided to Indian citizen/person of Indian origin is suitably amended to make him an Indian resident if he is in India for an overall period of 120 days in that particular year.

It is also proposed that an individual or an Individual or an HUF shall be said to be ‘Not Ordinarily resident’ in India in previous year, if the individual/manager of the HUF is a non – resident in India in seven out of ten previous Years preceding that year.

Further, an Indian citizen who is not liable to tax in any other country or territory by reason of his domicile or residence shall be deemed to be resident in India for the purposes of taxation and accordingly global incomes of such person may be taxed in India.[/vc_column_text][/vc_column][/vc_row]

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Ludhiana

Overseas Citizens of India (OCI) card holders, who are either below 20 years of age or above 50 years and have renewed their passports, can continue their travel to India till June 30, according to an official notification issued on December 17. This is subject to them carrying both, the old and the new passports along with the OCI card.

The move comes after a large number of OCI card holders in the last few months complained that they were being subject to harassment by both the immigration authorities and airline officials in implementing a little-known provision of the OCI, which were not being enforced so far.

In the last several months, Indian diplomatic missions and eminent Indian-Americans were flooded with such complaints.

In many cases OCI card holders had to cancel their trip to India or had to abruptly return mid-way from places like Dubai and Singapore.

The Indian-Americans have complained that they were not aware that every time an OCI card holder below the age of 20 and above the age of 50 years renew their passport they have to apply for renewable of OCI card too.

Overseas Citizens of India (OCI) card holders, who are either below 20 years of age or above 50 years and have renewed their passports, can continue their travel to India till June 30, according to an official notification issued on December 17. This is subject to them carrying both, the old and the new passports along with the OCI card.

The move comes after a large number of OCI card holders in the last few months complained that they were being subject to harassment by both the immigration authorities and airline officials in implementing a little-known provision of the OCI, which were not being enforced so far.

In the last several months, Indian diplomatic missions and eminent Indian-Americans were flooded with such complaints.

In many cases OCI card holders had to cancel their trip to India or had to abruptly return mid-way from places like Dubai and Singapore.

The Indian-Americans have complained that they were not aware that every time an OCI card holder below the age of 20 and above the age of 50 years renew their passport they have to apply for renewable of OCI card too.[/vc_column_text][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]The Cabinet on Wednesday approved key changes in India’s foreign direct investment (FDI) policy by easing investment norms across sectors including aviation, construction and single brand retail among others.

The Narendra Modi-led government has allowed 100 percent FDI under automatic route for single brand retail trading and construction development. Currently, for single brand retail, FDI up to 49 percent is allowed under automatic route

Similarly, foreign airlines can now invest up to 49 percent via government approved route in Air India. In addition, foreign institutional investors (FIIs) can now invest in power exchanges through primary market and definition of ‘medical devices’ has been amended in the FDI policy, the government said in a release.

 

These amendments are government’s broader strategy to liberalise and simplify the FDI policy to facilitate ease of doing business and turn India into a global investment hotspot.

The government has decided to allow single brand retail trading entity to set off its incremental sourcing of goods from India for global operations during initial 5 years, beginning April 1 of the year of the opening of first store against the mandatory sourcing requirement of 30 percent of purchases from India.

Hence, incremental sourcing will imply an increase in terms of value of such global sourcing from India for that single brand (in INR terms) in a particular financial year over the preceding financial year, by the non-resident entities undertaking single brand retail trading entity, either directly or through their group companies.

After completion of this 5-year period, the single brand retail trading entity shall be required to meet the 30 percent sourcing norms directly towards its India’s operation, on an annual basis,” the government release said.

According to experts, FDI in single brand retail trading sector will now gain momentum as the government has removed various procedural hurdles.

“The approval through automatic route with respect to single brand retail trading will quicken the FDI clearance process as no prior government approval would be required. We expect that FDI in single brand retail trading sector will now gain further momentum due to the process not being subject to regulatory scrutiny and approval process,” Rabindra Jhunjhunwala, Partner, Khaitan & Co said.

In case of the aviation sector, foreign airlines currently can make investment up to 49 percent of their paid up capital via government route in Indian companies operating scheduled and non-scheduled air transport services. However, the provision was not applicable to Air India, implying that foreign airlines could not invest in the national carrier.

“It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49 percent under approval route in Air India subject to the conditions that foreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49 percent either directly or indirectly. Substantial ownership and effective control of Air India shall continue to be vested in Indian National,” the release said.

In 2016, the government had brought FDI policy reforms in a number of sectors such as defence, construction, insurance, and pension, other financial services, asset reconstruction companies, broadcasting, civil aviation, as well as pharmaceuticals.

During April-September, 2017-18, FDI inflows grew 17 percent on year at USD 25.35 billion. In the financial year 2016-17, total FDI inflows hit an all-time high of USD 60.08 billion, as compared with USD 55.46 billion a year ago.[/vc_column_text][/vc_column][/vc_row]