The Confederation of Indian Industry (CII) has demanded easier Foreign Direct Investment (FDI) norms for Indian Higher Education. It said that FDI in a Section 25 company against equity subscription should not come under the purview of the Foreign Currency Regulation Act (FCRA) at a Higher Education Summit hosted by it .
In higher education sector, most for-profit entities usually receive funds through a trust, society or Section 25 company.
According to legal authorities and accounting firms opinion investment in a Section 25 company in exchange for a share subscription does not come under FCRA. How ever investors are jittery as the FCRA legislation has harsh penal provisions.
The industry body said it had submitted a paper to the Planning Commission in this regard for inclusion in the Twelfth Plan.
Further CII has also sought a clarification from the Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India (SEBI), that 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 instead of trusts and societies.