Foreign Portfolio Investment
- In economics, foreign portfolio investment is the entry of funds into a country where foreigners make purchases in the country’s stock and bond markets, sometimes for speculation.
- It is a usually short term investment (sometimes less than a year, or with involvement in the management of the company), as opposed to the longer term Foreign Direct Investment partnership (possibly through joint venture), involving transfer of technology and "know-how".
- Foreign Portfolio Investment (FPI): passive holdings of securities and other financial assets, which do NOT entail active management or control of the securities's issuer
- FPIs bring together all the three investment categories — foreign institutional investors (FIIs), their sub-accounts and qualified foreign investors (QFIs).
- The Central Board of Direct Taxes has notified that the new class of investors, FPIs, would be treated as FIIs under the Income Tax Act, 1961
Jan 2014
- The government has said that foreign portfolio investors (FPIs) will attract uniform tax rate across categories.
- It will be beneficial to QFI.
- Under the new norms, FPIs have been divided into three categories as per their risk profile and the KYC (Know Your Client) requirements, and other registration procedures would be much simpler for FPIs compared to the current practices.
- Category I FPIs, classified as entities with lowest risk, would include foreign governments and government related foreign investors.
- Category II would cover appropriately regulated broad based funds, appropriately regulated entities, broad-based funds whose investment manager is appropriately regulated, university funds and pension funds, among others.
- Those who are not eligible to be in the first and second set of classifications would be considered under Category III.
