The Securities and Exchange Board of India (SEBI) has assured banks, custodians, and brokers that they will not be held liable for the tax obligations of offshore funds in India. This clarification is expected to alleviate concerns that have hindered new foreign portfolio investor (FPI) registrations and permanent account number (PAN) issuance since last month, according to sources familiar with the matter.
A public clarification note on the issue is anticipated to be released soon by depositories or the Income Tax Department. “This will be very helpful for foreign investors to find appropriate domestic representatives to complete the new representative assessee (RA) or authorised representative (AR) entry in the common application form (CAF),” said a person knowledgeable about the discussions. They added that a clarification note is expected to be published soon.
This situation arose following changes introduced to the CAF framework and the PAN application process for FPIs effective April 1. Under the revised protocol, representatives of offshore funds, including custodians and intermediaries acting on behalf of FPIs, were required to provide additional information while applying for PAN allotment for their clients.
The prospect of potential tax liabilities raised concerns among banks, brokers, and other intermediaries regarding their roles representing offshore funds. Consequently, FPIs have struggled to identify domestic representatives willing to assume this responsibility, which has impeded onboarding and delayed the launch of new funds.
Reports indicate that the issuance of PAN for new FPIs has experienced delays over the past month, with at least 20 newly registered FPIs awaiting PAN allotment despite having completed the necessary registration processes. An email sent to the regulator has not yet received a response.
After discussions with the Income Tax Department, SEBI reportedly clarified through an email on Wednesday that banks and brokers serving as representatives for offshore funds will not face tax liabilities on behalf of their clients. This clarification is expected to help resolve the current bottlenecks in FPI onboarding and PAN issuance, according to market participants.
Published on May 13, 2026.
