What is the latest status of the Foreign Portfolio Investors (FPIs) based out of Mauritius and operating out of India? There were some concerns that these FPIs may be barred?

These concerns rose after the Financial Action Task Force (FATF) put Mauritius under the watch list wherein Mauritius based FPIs could come under the scanner and they would have lost their Category-1 status. Most of India FII flows come from Mauritius due to the low tax charged in the country and also the DTAA that India has with Mauritius. Now, the government of India has removed any doubts by notifying Mauritius as an "eligible country", thus enabling its investment entities to register as Category-I foreign portfolio investors (FPIs) with lower KYC requirements. As per the SEBI classification of 2014, Category-I FPIs include government and government-related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies, including entities controlled or at least 75 per cent directly or indirectly owned by such government and government related investor, pension and university funds. The Central government has specified Mauritius as an eligible country for the purposes of Regulation 5 (a)(iv) of the SEBI (Foreign Portfolio Investors) Regulation 2019," an order issued by the Finance Ministry said. More importantly, it specified that the category-I FPIs shall include entities from the FATF member countries or from any country specified as appropriately regulated funds. As a result, funds from Mauritius can register as Category-1 and get benefit from indirect transfer provisions under Income-tax Act, 1961. This sets the issue to rest.