Sebi has asked CBDT to allow FPIs to appoint ‘authorised signatories’ instead of AR/RA roles.
Offshore employees and local professionals are reluctant to take on AR/RA roles due to potential tax and legal exposure.
Regulators are expected to define obligations of ARs and RAs as CBDT works on a revised Income Tax Act.
In a growing tussle between regulators, the Securities and Exchange Board of India (Sebi) has proposed to the Central Board of Direct Taxes (CBDT) that foreign portfolio investors (FPIs) be allowed to designate ‘authorised signatories’ while registering or renewing licences to trade on Indian exchanges, according to reports.
The proposal, conveyed last week, seeks to offer an alternative to a contentious new income tax rule that requires foreign investors to appoint ‘authorised representatives’ (AR) or ‘representative assessees’ (RA).
1 April 2026
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The rule has triggered concern among market participants due to the potential legal and tax liabilities attached to these roles.
Liability Fears
According to a report by The Economic Times, employees of offshore asset managers as well as local professionals have shown reluctance to be named as ARs or RAs in the common application form that FPIs submit to Sebi.
The hesitation stems from fears of being held liable for tax obligations or being drawn into legal proceedings on behalf of the investor.
In contrast, professionals are seen as more willing to be designated as ‘authorised signatories’, as the scope of their liability is significantly narrower.
Unlike ARs or RAs—who may be required to act as proxies in negotiations or represent investors in legal matters—authorised signatories typically have limited, clearly defined responsibilities.
Guidance Awaited
Both Sebi and the CBDT are expected to provide greater clarity on the distinction between ARs and RAs in the coming weeks, amid rising industry concerns.
FPIs are currently subject to a 20% tax on dividends and capital gains, making regulatory certainty a key demand for global investors.
Alongside addressing these concerns, the CBDT is also working on a revised Income Tax Act aimed at improving tax clarity and predictability.
“There has been a lot of noise around this since there is no clarity on what the obligations of the person named in the form are. How does it work? What does it entail? What does it mean when you name someone as an AR or RA? These are questions we have as well.
We are actively engaging with the CBDT and have scheduled meetings with senior authorities,” said Aparna Thyagarajan, Chief General Manager at Sebi, during a webinar last week.
