Foreign Portfolio Investors from Cyprus to obtain Category I License in India

The Indian government has classified Foreign Portfolio Investors (FPIs) from Cyprus as eligible for Category I licence. This classification is expected to prompt more and larger investment funds from the European Union to route their investments through Cyprus.

Foreign investors are permitted to invest in Indian securities (shares, bonds, debentures, etc.) through different ways, such as Foreign Direct Investment, Foreign Portfolio Investment, Foreign Venture Capital Investment, Alternative Investment Fund, etc. with FPI being one of the most preferred routes.

Funds coming from non-FATF countries can also obtain Category I FPI registration in case the central government of India approves so. Cyprus is the third such country, after Mauritius and UAE, to be given approval. The approval was given through Order dated 14 June 2021 under the Securities and Exchange Board of India (SEBI) (Foreign Portfolio Investors) Regulation, 2019.

Category I FPI License provides important advantages to investors, such as exemption from Indirect Transfer Provisions related to Indian tax (which are otherwise applicable to overseas investors upon transfer of shares in an overseas entity with assets in India), higher position limits for investing in derivatives, etc.

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