SEBI Eases FPI Onboarding Rules After Tax Compliance Concerns

SEBI has moved quickly to remove a fresh pain point for foreign investors looking to enter Indian markets.

The market regulator said it has eased onboarding norms for Foreign Portfolio Investors (FPIs) after several investors flagged difficulties in obtaining Permanent Account Numbers (PAN) under India’s newly notified Income Tax Rules, 2026.

The issue emerged after the Central Board of Direct Taxes (CBDT) introduced revised PAN application forms in March, which required additional details from foreign investors during registration.

That created operational challenges for FPIs, especially global funds that typically use a simpler onboarding process to invest in Indian stocks and bonds.

After concerns were raised, SEBI took up the issue with CBDT, which has now issued clarifications to make the process smoother.

What Has Changed?

The biggest relief is around PAN documentation requirements. Under the revised framework:

• FPIs can now use the name of the authorised signatory mentioned in the Common Application Form (CAF) for PAN applications

• No separate supporting documents for that authorised signatory will be required

• Investors can use either the authorised signatory’s contact details or the FPI’s own contact information

• Documentation requirements around taxpayer identification details have also been simplified in certain cases

In simple terms, foreign investors now have fewer forms and fewer compliance hurdles before they can start investing in India.

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Why Has This Become A Concern?

India has already seen heavy foreign selling pressure this year. According to Business Standard, FPIs have pulled out more than ₹2.1 trillion from Indian markets so far in 2026. At a time when India wants to attract long-term global capital, additional paperwork has become an unnecessary hurdle.

Industry participants had warned that delays in PAN approvals could slow new investments into Indian equities and debt markets.

SEBI likely wanted to avoid sending the wrong signal to global investors. India continues to compete with other emerging markets for foreign capital, and regulatory friction can push investors toward easier markets.

Sources:

The Economic Times

Business Standard