India must enable regularisation of unaccounted money lying within the country or that stashed abroad to channel them toward funding infrastructural growth, a group of NRIs led by S P Hinduja has said.
'A proper system needs to be introduced to regularise unaccounted money in India or abroad for being used for the country's economic and infrastructural growth,' the IndusInd International Federation said in a pre-Budget memorandum to Finance Minister Pranab Mukherjee.
India would require well above $500 billion for its infrastructure development in the next five years, according to Planning Commission estimates.
The IIF is an apex organisation of NRIs. Besides UK-based Hinduja Group Chairman S P Hinduja, its leading members include Ram Buxani from UAE, K Sital from Hong Kong, Nari Pohani from the US, Vashi T Purswani from Thailand and Kamal Fabiani from Spain.
The IIF also suggested that the country needs to take up electoral reforms. The NRIs favoured state funding of elections and stopping the 'flow of money into the parallel economy.'
The NRIs' body said it should be made mandatory for political parties to maintain separate accounts of election expenditure which should be audited by recognised firms under the direction of the Election Commission.
Unaccounted money within the country and abroad was an issue with the BJP and the CPI (M) during the last general elections. The Congress too had said it was committed to checking the menace.
The IIF said apart from large projects, money should be allotted for smaller infrastructure projects like feeder roads, modest and alternative energy projects, developing water resources and expanding educational and health facilities. These will create employment, it said.
Seeking encouragement to expatriates for investing in the capital market, the IIF said NRIs should be given the same tax treatment as given to foreign institutional investors.
'NRIs are required to pay tax at 10 per cent on short-term gains in the equity markets. However, short-term capital gains earned by Mauritius-based FIIs on Indian stock market transactions are tax-exempt. The tax treatment on short-term capital gains needs to be on a par for both FIIs and NRIs,' it said.
Several NRIs would like to make India their permanent home after retirement. '...The Indian tax authorities should not tax the income derived from interest on their investment in savings and pension plans in foreign institutions and foreign countries,' the IIF said.
The NRIs' federation, which has 11 centres in India and regional offices in important cities like New York, London, Dubai and Hong Kong, said prohibiting overseas corporate bodies from investing in bourses is a deterrent for expatriates.
It said a large number of them have their wealth in OCBs. As long as proper disclosures are in place and 'know-your-customer' information is provided, OCBs should be permitted to invest in the country, it said.
'By lifting the ban on OCBs and simplifying the procedures for individual NRI investments, the market will be widened,' its pre-Budget memorandum said.
Overseas Indians are not allowed to purchase farm land. The IIF has suggested permitting them to buy or take on a long-term lease agriculture land for cultivation.
'This will enable them to bring in the latest technology and provide support to farming activity,' it said.
The NRIs are for liberalising the foreign direct investment regime, which has caps on various sectors. The IIF has called for increase in sectoral caps in insurance, defence production, air transport services and single-brand retail. It also sought opening up multi-brand retail for FDI.
Other demands included reviewing the double tax avoidance treaties 'in totality' to make them FDI-friendly and increasing the maximum stake that an offshore financial entity/bank can hold in an Indian bank.