The Income Tax Department will come out with the final guidelines by the end of this month on implementation of the General Anti-Avoidance Rules (GAAR), based on the recommendations of the Parthasarathi Shome panel, Union Finance Minister P. Chidambaram said here on Monday.
Mr. Chidambaram was talking to reporters after the submission of the final report by the Shome expert panel on Monday.Mr. Chidambaram said his Ministry would first finalise the report on GAAR and then consider if it was necessary to amend the Income Tax Act.
“And, if it is necessary to amend the I-T Act, I am afraid, it will certainly take longer time because that has to go to the Cabinet,’’ he remarked.
Mr. Chidambaram also announced that the other report of the Shome Committee on indirect transfer of assets by non-resident Indians would be put on the Finance Ministry’s website for comments as soon as possible.
New policy on insurance products
Meanwhile, giving a further fillip to reforms, Mr. Chidambaram hinted that the Insurance Regulatory Development Authority (IRDA) was likely to come up with a new policy to accord automatic clearance to standard life insurance products.
He also indicated relaxation in investment guidelines to encourage fund flow into the infrastructure sector. At present, IRDA approves all insurance products on File and Use basis, meaning insurance companies can sell the product only after getting approval from the insurance regulator. He said in a country with low spread and penetration of life insurance, the objective should be to sell simple and easily understood products. Such products would automatically be deemed to have been approved after 15 days of its intimation to the IRDA unless it found non-compliance within that period, he added.
In an attempt to encourage investments in the infrastructure sector, Mr. Chidambaram said the IRDA would allow investments in an infrastructure special purpose vehicle (SPV) floated by any company. Under this, the SPV should be a wholly-owned subsidiary of the parent company and the debt instrument issued by the SPV was guaranteed by the parent company, having due regard to rating criteria.
On investments in debt instruments, he said,“Now we are saying 75 per cent will apply, including government securities and other investments. If you include this in 75 per cent, it frees up 12.5 per cent space for less than AAA rated instruments.’’ Because there are not enough AAA rated instruments for them to invest, therefore they have to look for an instrument and therefore they have to go down to a AA rated instrument if this change is made. And the IRDA thinks this change can be made.’’