Blackrock MFs foreign funds moving to india
Blackrock MFs foreign funds moving to indiaReuters file

Foreign mutual fund managers are likely to shift base to India to take advantage of the operating rules on special taxation regime announced by the Indian government Wednesday. However, other players such as private equity, sovereign and pension funds would prefer to wait for more clarifications, said a report in the Economic Times.

"As things stand today, long-term investors, especially mutual funds, are actively considering shifting fund managers to India. However, others such as PE and pension funds which invest in India, some of the regulations could still create problems," the daily quoted a source as saying.

"The new rules are positive and a step forward. Our regional office will thoroughly evaluate the pros and cons, seek opinion from consultants, before taking a decision," ET quoted an official at a foreign fund house.

The daily said the mutual fund asset managers have sought tax advice on the fallout of such a move.

Last Wednesday, the India's ministry of finance had come out with rules operationalising the special taxation regime applicable from next month to facilitate location of fund managers of offshore funds to India.

But fund managers other than those of mutual funds are being held back due to two contentious issues, according to ET. "The issues are funds having to give a declaration that not more than 5% of the total investors are Indians, and the worry of transfer pricing scrutiny," it said.