Foreign direct investment in a Section 25 company against equity subscription should not come under the purview of the Foreign Currency Regulation Act (FCRA), the Confederation of Indian Industry said at a higher education summit hosted by it here on Tuesday.
In higher education, for-profit entities usually receive funds through a trust, society or Section 25 company.
While legal authorities and accounting firms opine that investment in a Section 25 company in exchange for a share subscription does not come under FCRA, investors are jittery as the FCRA legislation has harsh penal provisions, it said.
The industry body said it had submitted a paper to the Planning Commission in this regard for inclusion in the Twelfth Plan.
Further, seeking a clarification from the Corporate Affairs Ministry and the Securities and Exchange Board of India, CII said if a Section 25 company issues capital to the public in an initial public offer or private placement, it should neither lose tax exemption nor its not-for-profit status just because the shares are valued above par.
At present, 100 per cent FDI is allowed in education. Since only a Section 25 company can issue share capital, it is the most preferred medium for investment.