Explained:What is Round Tripping?

News:Supreme Court has rejected the Income Tax department notice against a News Channel alleging round tripping of money.

Facts:

• Round tripping refers to money that leaves the country through various channels and makes its way back into the country often as foreign investment.
• Reasons:There are various reasons that promote round tripping.Mainly, Tax concessions allowed in the foreign country encourages individuals to park money there and then reroute it.
• Ways: Round Tripping money could be invested in offshore funds that in turn invest in Indian assets.Participatory Notes(P-Notes) is one of the routes that have been used in the past.

Additional Facts:

• Participatory notes(P-notes):These are issued by registered foreign portfolio investors(FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves with the market regulator(Securities and Exchange Board of India).