Latest news with #MoinLadha
Time of India
6 days ago
- Business
- Time of India
Dubai real estate deals hit regulatory hurdle! Indian buyers who bought homes using international credit cards in a soup; here's why
AI-generated image Indian property buyers in Dubai are facing regulatory challenges after using international credit cards (ICCs) for property purchases. They opted for this payment method through builder-shared links or during UAE visits, making down payments and instalment payments. The process appeared straightforward, avoiding bank paperwork and potentially circumventing the 20% tax-collected-at-source ( TCS ). However, they allegedly misused ICCs, which are designed for current account transactions like purchasing books, digital content, and hotel bookings, rather than capital account transactions such as property acquisition. While no explicit regulation prohibits ICC usage for overseas property purchases, banking professionals interpret RBI notifications as restrictive of such practices. Also read: Foreign inflows hit 7-month high in primary market with $1.7 billion in July; secondary market sees sharp outflows To address scrutiny from income tax and enforcement authorities, these investors are pursuing corrective measures. They plan to remit funds through RBI's Liberalised Remittance Scheme (LRS), while cancelling previous credit card transactions, citing error. Subsequently, they expect refunds from builders, failing which property disposal becomes necessary. "Indian residents who have unintentionally paid money through credit card for purchase of property outside India need to approach RBI to regularise their mode of payment. RBI should take a lenient view as the money paid through credit card is a legitimate payment and only the mode of payment was wrong. The regulator should compound the contravention if applied for and need not ask to unwind the transaction or sell the property," said Rajesh Shah, partner at the CA firm Jayantilal Thakkar & Co, as quoted by news agency PTI. While compounding requires accepting violation and paying fines, some buyers prefer discretion, quietly cancelling credit card transactions. The LRS permits resident individuals annual transfers of $250,000 for overseas assets and online purchases. ICC usage within India for foreign purchases counts towards LRS limits, whilst overseas travel expenses are exempt. Property purchases via ICC remain non-compliant, regardless of transaction location. RBI's LRS circular specifies maintaining bank accounts for minimum one year before capital account remittances. According to Moin Ladha, partner at the law firm Khaitan & Co, quoted by ET, "Purchase of property overseas is permitted specifically under Foreign Exchange Management (Overseas Investment) Rules, 2022. These rules prescribe the mode and conditions permitting such acquisition, which include inheritance, gift, funds in a resident foreign currency account earned as an erstwhile NRI, and remittance under the LRS. Since general permission is not available to acquire a property by using an ICC, any such acquisitions need to be regularised (by a post facto approval or sale of the property) followed by compounding the interim non-compliance with RBI." Property purchases abroad remain subject to 20% TCS under section 206C(1G)(a) of the I-T Act, regardless of RBI's stance on transactions, notes Ashish Karundia, founder of Ashish Karundia & Co. Stay informed with the latest business news, updates on bank holidays and public holidays . Discover stories of India's leading eco-innovators at Ecopreneur Honours 2025
Mint
07-07-2025
- Business
- Mint
Sebi may revisit AIF rules after industry pushback on investor parity norms
Mumbai: The Securities and Exchange Board of India (Sebi) is reviewing a set of new rules for Alternative Investment Funds (AIFs) following growing concerns from fund managers, legal advisors and investors, at least five people aware of the development told Mint on the condition of anonymity. The rules, which came into effect in December 2024, were designed to ensure equal treatment of investors, but many in the industry say they are too inflexible and may disrupt existing fund structures and global investor participation, experts said. AIFs—private pools of capital that invest in startups, real estate, and unlisted companies—have become a major vehicle for capital formation in India. As of 31 March 2025, AIFs had invested ₹5.38 trillion, according to Sebi data. Of this, real estate accounted for ₹69,896 crore, IT services for ₹34,553 crore, and NBFCs for ₹25,564 crore. The 13 December Sebi circular mandates that all AIF investors must be treated equally, both in how capital is drawn down and how returns are distributed. This is based on two key principles: pro-rata rights, which require profits and losses to be shared in proportion to each investor's committed capital; and pari-passu rights, which ensure all investors are treated equally, unless a specific exemption applies. The rules were meant to bring clarity and fairness to the AIF space. But they have also cast uncertainty over existing fund structures, especially those involving differentiated rights, preferred investor classes, or global institutional limited partners (LPs). Before the rule change, private funds had more leeway to tailor rights for different investors. Some offered priority distribution models where 'senior" investors received returns before 'junior" ones, often in exchange for taking on less risk. While Sebi always promoted fair treatment in spirit, these practices were not explicitly restricted until now. The regulator first signalled discomfort with these structures in 2022, when it paused fundraising by funds using such waterfall distribution models. The December circular went further, formalizing a uniform treatment requirement and narrowing the scope for deviation. Seeking clarity on real-world impact Since then, legal and industry experts have warned that the rules, though well-intentioned, could stifle fund design and discourage foreign participation. 'The Sebi circular on pro-rata and pari-passu rights for AIF investors was brought to bring clarity to fund structuring, aiming to ensure fairness and uniformity in investor rights, while carving out limited exceptions for sponsors and other strategic investors," said Moin Ladha, partner at Khaitan & Co. Ladha noted that the transition has raised difficult questions about how the rules affect legacy commitments and deal terms. 'Since its issuance, however, several industry stakeholders have raised concerns regarding its impact on legacy fund commitments and other commercial arrangements necessary for making investment viable," he said. 'While Sebi has not issued a formal clarification so far, it has usually been proactive in engaging with the industry to address practical implementation challenges," Moin added. Industry participants are also seeking clarity on how these rules apply to multi-layered structures, and to Employee Welfare Trusts (EWTs)—entities used by some funds to allocate carried interest or profit-sharing to employees, Moin noted. The circular does allow a few carve-outs. Fund sponsors and managers, for instance, can make subordinated investments—meaning they take more risk and are paid last. Large Value Funds (LVFs), which collect ₹70 crore or more from each investor, can also offer special terms, so long as they're disclosed upfront in legal documents. Even so, legal experts say these exceptions are too narrow to accommodate common practices in the industry. 'Regulatory clarity on the 'pro-rata' part of the December 13, 2024, Sebi circular would go a long way in aligning legal expectations with practical realities for AIFs," said Nandini Pathak, partner, Bombay Law Chambers. She pointed out that global funds routinely use different allocation methods depending on the phase of investment. While capital calls may be based on outstanding commitments, distributions often follow the ratio of actual capital invested. 'Institutional LPs also prefer allocation rules for distributions to be on invested capital ratio basis, as is evident from the ILPA standard term sheet," she said, referring to the guidelines followed by large international investors. Experts argue that Sebi should allow Indian AIFs to adopt such globally accepted practices—provided they're clearly spelled out in the fund's Private Placement Memorandum (PPM), which lays out terms, risks and investment strategy for potential investors. Sebi response in the works To address the feedback, Sebi has formed a Standard Setting Forum (SSF), which is reviewing suggestions and working on a list of investor rights that AIFs may offer on a differential basis without violating the equal treatment rule. 'The SSF is looking at detailed industry feedback and certain reforms are expected," said Vivaik Sharma, Partner at Cyril Amarchand Mangaldas. 'The SSF has specified a positive list of rights which may be provided by AIFs on a differential basis. It should be clarified that any additional rights may be offered to specific investors of AIFs so long they are not prejudicial to any other investor." Some concerns go beyond distribution rights. Experts have pointed to other commercial nuances the rules currently overlook—such as profit-sharing with advisors or offsetting fund expenses across different legal entities in a master-feeder structure, a common setup for funds with international investors. 'When dealing with master-feeder structures where fund expenses are incurred at both levels (main fund and sub-funds), allowing for offsets of the relevant amount of fund expenses incurred at the feeder level when considering the proportionate allocation of fund expenses among investors at the master fund level, are some of the areas for reconsideration," said Clarence Anthony, founder of Clarence & Partners. 'Most of these could be addressed by amending the Implementation Standards for offering of differential rights to select investors of an AIF." People familiar with the matter said Sebi is currently reviewing all industry feedback and may issue formal clarifications or revisions in the coming months.
Time of India
02-07-2025
- Business
- Time of India
RBI's Trust concerns stall wealth transfer plans of India's rich families
Mumbai: A 'trust deficit' between the regulator and several rich Indian families is stalling plans to ring-fence wealth and put in place a succession strategy for the nextgen. Many promoter families hold shares of the companies they own as well as portfolio investments in other securities and listed non-group entities through closely-held non-banking finance companies (NBFCs). Family patriarchs have often preferred transferring their-and other family members'-ownerships in such NBFCs to a trust which holds the investments and distributes the earnings to the trust beneficiaries. This family blueprint to preserve wealth now faces a challenge. The Reserve Bank of India ( RBI ), which regulates NBFCs, is questioning the transfer of ownership of at least four families to discretionary trusts due to the opaque structure of trusts, persons familiar with the subject told ET. If an NBFC holds a substantial stake in any listed entity, an ownership transfer of the finance company also requires the approval of the Securities & Exchange Board of India, under the takeover code. "Perhaps, RBI could take a cue from the approach adopted by Sebi vide its 2017 circular, to consider prescribing conditions for addressing policy concerns over future changes or control structure in a trust," said Moin Ladha, partner at the law firm Khaitan & Co. "In any event, most families would retain the control and only a contractual obligation in the nature of trust is created for achieving continuity and succession planning. So, the eligibility and fit and proper status isn't impacted by the settlement to trust," said Ladha. Live Events Some believe that RBI's reservations may also stem from the fact a promoter giving guarantee to a group company to enable it borrow at a lower interest rate or carry out certain other transaction, may isolate the shares by setting them aside in a trust if the guarantee is invoked. RBI, however, does stall the shift in ownership as long as the NBFC in question is a 'core investment company' holding and managing investments in group companies. Also, core companies which have not raised money from public investors or through bank borrowings, may not need a go-ahead from the regulator. While RBI did not respond to ET's queries, the regulator, sources said, is likely to harbour the view that unlike long-term, strategic holdings in group companies, an NBFC's investments in shares of non-group companies are in the nature of short-term, portfolio investments. Since the latter kind of NBFCs is considered to be dealing in financial securities, RBI does not want them to be controlled by trusts. A discretionary trust is formed by the settlor (who is often the head of the family who transfers the assets), immediate family members are named as beneficiaries, and independent professionals or a trusteeship company serve as the trustees responsible for distributing the earnings of the trust from cash inflows like interest, rent, and capital gains to the beneficiaries in proportions that are not prefixed. "It's sometimes perceived that the RBI is trying to reduce the number of NBFC licence holders. Any transfer of ownership or management application ends in denial. It seems the regulator wants to focus on a few players who do proper compliance. We have seen cancellation of licences for failing to file annual returns or not maintaining adequate capital," said Rajesh Shah, partner at the CA firm Jayantilal Thakkar & Co. Any change in NBFC shareholding resulting in acquisition or transfer of 26% or more of its paid-up capital requires prior RBI approval. "The process is stringent, with RBI empowered to seek additional information during its due diligence. When the acquirer is a trust, KYC compliance extends to both trustees and beneficiaries, posing greater complexity in discretionary trusts where ownership is undefined. Notably, RBI regulations do not prescribe a specific timeline within which such approvals must be granted, making the overall process both document-intensive and time-sensitive for investors and promoters alike," said Isha Sekhri, partner at Isha Sekhri Advisory LLP, a CA firm. Economic Times WhatsApp channel )
Time of India
25-06-2025
- Business
- Time of India
In Swiss they trust, though the banks are not as cool as before
Mumbai: Why are so many Indians parking money in Swiss accounts despite the alpine banks losing their once-famed secrecy? Who are these people? Is it forbidden funds- as one would suspect- or kosher money? Questions are popping out from numbers released by the Swiss National Bank, claiming that Indian money with Swiss banks trebled in 2024. What has happened? Some of the money flowing into the custody of these tight-lipped bankers may have a questionable colour. But, new rules in the UK and other countries, coupled with global uncertainties and choppy currency markets are driving many NRIs, wealthy families leaving India as well as rich residents to keep their money with Swiss banks, say financial advisors and lawyers familiar with such asset planning. According to them, most of the recent deposits piling up in Swiss banks are not 'black money' but funds of overseas Indians moving from other jurisdictions to Switzerland-many choosing to hold family wealth in Swiss foundations and trusts which are governed by friendly regulations. Switzerland offers a framework to recognise trusts formed under foreign law. (Join our ETNRI WhatsApp channel for all the latest updates) "The recent overhaul of the UK's non-dom rules has prompted many NRIs to relocate to either the UAE or Europe. Understandably, they are moving their wealth accounts. Singapore and Switzerland are the natural choices for holding such accounts. This could be the reason for increased remittance to Switzerland. Singapore and Switzerland are increasingly attracting global investors as evolved financial jurisdictions," said Moin Ladha, partner at the law firm Khaitan & Co. Live Events This year, the UK changed its 200-year old regime, causing many NRI families to look for second homes in other countries to escape high tax on overseas earnings and inheritance. The Swiss central bank data show that Indian money held through asset managers, insurers, and other financial intermediaries surged three times to 3.5 billion Swiss franc (or ₹37,600 crore), after falling to a four-year low in 2023. Money in customer (or retail) accounts of Indian clients rose only 11% in 2024. "The numbers point at a broader global trend of capital reallocation driven by regulations and tax," said Ladha. While there is no official statement from Swiss Banks about the reasons for the surge in Indian deposits, it reflects Switzerland's continued status as a trusted financial hub, said Isha Sekhri, who specialises in international and cross-border taxation. The strength and stability of the Swiss Franc amid geopolitical volatility, combined with its safe-haven reputation and agile regulations, make it an attractive destination for capital preservation, she said. While the Swiss currency slipped last year, it has appreciated 9.5% against the US dollar since January, and has outperformed its peers to close 2023 as the best-performing G10 currency. CONFIDENTIALITY LOST However, with countries signing pacts to share information on owners of bank accounts and other financial assets, Swiss banks have probably lost some of their lure to those stashing illicit money. As the Swiss revealed data on active and many closed accounts, the Indian Income tax department and the Enforcement Directorate invoked harsh laws against black money and laundering to question residents and serve notices to several NRIs. "Many of these accounts (linked to Indians) are held through investment vehicles or trusts where Indian individuals are 'ultimate beneficial owners' (UBOs), even if not named directly on the accounts. Enhanced global reporting standards could be contributing to greater visibility of such holdings," said Sekhri, partner at Isha Sekhri Advisory LLP. "Originally, many large families preferred keeping the names of beneficiaries under wraps. Here, Swiss confidentiality came handy, paving the way for estate planning along with tax avoidance," said Mitil Chokshi, partner at the CA firm Chokshi & Chokshi.
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Business Standard
30-05-2025
- Business
- Business Standard
RBI's LRS review to align with wider economic, geopolitical conditions
The Reserve Bank of India's (RBI's) initiative to review the Liberalised Remittance Scheme (LRS) framework is part of a routine exercise to align it with wider economic and geopolitical conditions, experts said. In its annual report released on Thursday, the RBI said it has initiated a comprehensive framework review and is examining various aspects, including the annual remittance limit, permissible purposes, transaction modes, and currency options. The LRS scheme was introduced in 2004, allowing all resident individuals to remit up to $25,000 per financial year for any permissible current or capital account transaction, or a combination of both, free of charge. This limit was gradually revised to $250,000 on 26 May 2015. 'Given the current dynamic economic environment, evolving capital flows, and the emergence of new-age transactions — such as investments in digital assets and international platforms — there is a clear need to relook at the LRS framework. Additionally, with remittances now linked to PAN, there may be a broader policy push to align LRS usage with income-tax compliance, ensuring that outward remittances reflect an individual's financial profile and tax status. A review can also help address concerns around sensitive sectors and potential misuse,' said Moin Ladha, Partner at Khaitan & Co. According to recent data, India's outward remittances under the Liberalised Remittance Scheme moderated by 6.85 per cent year-on-year (YoY) to $29.56 billion in FY25, after rising to an all-time high of $31.73 billion in FY24. In its annual report, the RBI said it has eased procedures and expanded the scope of the LRS in FY25, with the aim of improving convenience and accessibility for resident individuals. From 3 July 2024, authorised dealers (ADs) were allowed to facilitate remittances based on online or physical submission of Form A2, subject to Section 10(5) of FEMA 1999, irrespective of transaction value. Additionally, resident individuals were permitted to send funds under LRS to International Financial Services Centres (IFSCs) for any permissible current or capital account transaction, effective from 10 July 2024, the RBI said. Individuals were also allowed to use funds held in their IFSC-based foreign currency accounts to make transactions in other foreign jurisdictions. Previously, LRS remittances to IFSCs were allowed only for investment in securities. This was expanded on 22 June 2023 to include payments of education fees to foreign universities operating in IFSCs. 'Amid the growing educational inflation abroad and broader inflation, there is a need to relook at the LRS limits. The review is part of periodic assessment and the RBI keeping in sync with the changing realities,' another expert said.
