New Delhi: Inter-ministerial opinion appears to be growing on allowing FDI in LLPs - a new form of business framework- in sectors where 100 per cent overseas investment is permitted through automated direction.
The Department of Industrial Policy and Promotion (DIPP), the Department of Economic Affairs and Corporate Affairs Ministry are involved in discussions on a policy instruction on foreign direct investment(FDI) in LLPs, an official said. LLP is a multiple between a company and a partnership firm.
As it allows unlimited number of associates with limited liability, it is expected to become popular for consulting and accountancy outfits.
"The matter is on fast track...it may be decided soon," the official said.
Earlier, the DIPP had some concerns on allowing FDI through automatic route in these firms on safety concerns. It had wanted the suggestions to be processed by the Foreign Investment Promotion Board (FIPB).
FDI up to 100 per cent is allowed through an automatic path in a number of industries like power generation, construction and development, telecom equipment manufacturing, Special Economic Zones and new airports. Under the automatic way, a foreign company can invest in India without seeking prior authorization from the FIPB. But the Reserve Bank needs to be informed about the inflows.
To encourage professionals to opt for LLPs, Finance Minister in the Budget this year proposed to exempt transfer of assets to LLP firms from capital gains tax, provided the revenues of the private or unlisted company is below Rs 60 lakh.
As of now, 1,152 LLPs have been authorized in the country.
In terms of business structures, FDI is prohibited in partnership firms, but is allowed in companies theme to sectoral caps.
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Decision on FDI in LLPs likely soon