The Securities and Exchange Board of India (SEBI) has clarified to banks, custodians and brokers that they will not be held liable for the tax dues of offshore funds in India, easing concerns that had delayed fresh foreign portfolio investor (FPI) registrations and PAN issuance since last month, according to people familiar with the matter.
A public clarification note on the issue is expected to be issued soon by depositories or Income Tax Department, sources said.
“This will be very helpful for foreign investors to find appropriate domestic representatives to complete the new RA or AR entry in the CAF form,” one person aware of the discussions said. “I believe a clarification note will be published soon.”
The issue arose after changes were introduced to the common application form (CAF) framework and PAN application process for FPIs from April 1.
Under the revised framework, representatives of offshore funds, including custodians and intermediaries acting on behalf of FPIs, were required to furnish additional details while applying for PAN allotment for clients.
Liability concerns
This raised concerns among banks, brokers and other intermediaries over whether they could face potential tax liability for offshore funds they represented. As a result, FPIs found it difficult to identify domestic representative assessees willing to take up the role, slowing onboarding and delaying fresh fund launches.
PAN issuance for new FPIs had been impacted over the past month, with at least 20 newly registered FPIs currently awaiting PAN allotment despite completing registration formalities, according to sources.
An email sent to the regulator did not elicit a response.
Following consultations with the Income Tax Department, SEBI is understood to have clarified via email on Wednesday that banks and brokers acting as representatives for offshore funds would not be exposed to tax liability on behalf of their clients.
The clarification is expected to help ease the current bottleneck in FPI onboarding and PAN issuance, market participants said.
Published on May 13, 2026