The recommendations have been made by SEBI's working group that was set up to look into the concerns raised by the overseas Indian investor community.
The development comes after various issues were raised on SEBI's circular, dated April 10, 2018, on KYC norms for FPIs.
In a notification saying the new regulations would be called the Securities and Exchange Board of India (Mutual Funds) Regulations, 2015, SEBI said the restrictions would not apply "if the funds managed are of Category-I Foreign Portfolio Investors (FPIs) and/or Category-II Foreign Portfolio Investors which are appropriately regulated broad based funds".
SEBI has classified FPIs into three categories, with the first two being low-risk foreign institutions that include sovereign wealth funds, pension funds, banks, mutual funds, insurers, multilateral institutions and well-regulated foreign entities, including portfolio managers.
As per the existing norms, a fund manager managing a domestic scheme is allowed to manage an offshore fund, subject to three conditions.
The first requires the investment objective and asset allocation of the domestic scheme and of the offshore fund to be the same. The second mandates at least 70 percent of the portfolio to be replicated across both the domestic scheme and the offshore fund.
The third condition requires that the offshore fund should be broad-based with at least 20 investors with no single investor holding more than 25 percent of the fund corpus. Otherwise, a separate fund manager is required to be appointed for managing an offshore fund.
SEBI's board approved the changes in March following an invitation for comments from the public on the proposals.
The RBI is widely expected to go for a 25 basis points rate cut amid a widespread slowdown in the Indian economy. Except for metal stocks most other sectoral indices traded in the green.
The benchmark Sensex opened at 37,025.27, higher from its Tuesday's close of 36,976.85.
At 9.49 a.m., the Sensex traded 73 points higher at 37,049.85. The broader Nifty also traded 15.70 points higher at 10,963.95.
Meanwhile, Foreign Portfolio Investors (FPIs) continued to sell Indian stocks.A On Monday, FPIs offloaded stocks worth Rs 2,107.93 crore.
As a result, the tax incidence for foreign portfolio investors (FPIs) will come down by 4-7 per cent removing the anomaly created in the Budget. The move will also cheer domestic investors as the withdrawal would also apply to them.
The action came weeks after FPIs turned net sellers after levy of surcharge in the Union budget and are estimated to have pulled out about Rs 8,500 crore since the budget announcement.
In her maiden budget, Finance Minister Nirmala Sitharaman raised surcharge on super-rich or those having annual taxable income more than Rs 2 crore. The surcharge of 25 per cent was levied on those having taxable income between Rs 2 crore and 5 crore, and 39 per cent on those with taxable income over Rs 5 crore.
In a sort of mini Budget which included a flurry of economy revival policy measures, Finance Minister Sitharaman on Friday announced that "the enhanced surcharge from long-term and short-term capital gains on FPIs stand withdrawn."
Investors hailed the government decision with Karma Capital head Nandita Parkar who also represent industry body of FPIs (AMRI) said that the Finance Minister has done an extraordinary job and has responded decisively to their issues.
"Surcharge reversal is of course big relief for FPIs that would eliminate the need to look for any exotic solutions like restructuring or changing PAN status of SICAV type of structures. It's a bonus for domestic investors as well," Sunil Gidwani, Partner, Nangia Advisors (Andersen Global), said.
It may be noted that FPIs had done hectic lobbying to remove the surcharge with many of them pulling out their investment from the capital market.
Sitharaman noted that government will review surcharge on HNIs after 75th Independence Day of India.
Elaborating on mechanism to withdraw surcharge levy, effected through Finance bill, she said that it will be withdrawn through government orders. Revenue Secretary Ajay Bhushan Pandey said that the fiscal impact of the removal of enhanced surcharge would be to the tune of Rs 1,400 crore annually.
Terming it as a key measure to boost economy and investor sentiment, Sitharaman said that in order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by Finance Act, 2019 on long and short-term capital gains arising from transfer of equity shares referred in Sections 111A and 112A respectively.
"This is hugely positive for the market. This is something which should address the ongoing concerns as well as those structural changes that should have been brought into effect a while back. The rollback of higher surcharge on FPI as well as domestic investors is a welcome move since it was one of the factors that put a lot of dent on investors sentiment, specifically FII and FPIs," said Mustafa Nadeem, CEO, Epic Research.
Bhavin Shah, Partner & Leader, PwC India said: "FM announced removal of higher surcharge on capital gains for FPIs. Her presentation suggested amendment in respect of capital gains taxable under Sections 111A and 112A. FPIs are however taxable under a different section 115AD. Hope fine print makes amendment in correct section."
The BSE gauge Sensex settled with a gain of 2.16 per cent or 792.96 points; while the NSE Nifty ended 2.11 per cent or 228.50 points higher.
Indian equities during the second half of the trading session also got a boost from the news that the US and China will soon resume trade talks despite many failed negotiations in recent months.
However, Asian markets closed with significant losses as investor worries grew over the ever-lasting US-China trade war, though sentiment revived in other markets, including India and the Europe, after the news broke out about a possible resumption of talks between the two major economies.
Riding on a wave of economic stimulus optimism, the 30-share Sensex opened over 663 points higher, but global volatility wiped out its gains as the session progressed. It swung 1,052 points during the day. The index, however, made a roaring comeback in the later half tracking news about US-China trade talks resumption.
Similarly, the broader NSE Nifty reclaimed the 11,000-level. During the day, it climbed a peak of 11,070.30 and touched a low of 10,756.55.
Both benchmarks Sensex and Nifty have logged their best single-day gains in over three months, since the return of the Narendra Modi government for a second term.
Finance Minister Nirmala Sitharaman on Friday announced a raft of relief measures, including the rollback of enhanced super-rich tax on foreign and domestic equity investors, for the ailing economy.
She also announced exemption of startups from 'angel tax', a package to address distress in the auto sector and upfront infusion of Rs 70,000 crore to public sector banks.
To bolster consumption, the government also said that banks have decided to cut interest rates, a move that would lead to lower EMIs for home, auto and other loans.
Yes Bank topped the gainers' list on the Sensex. It was followed by HDFC, Bajaj Finance, HDFC Bank, ICICI Bank, L&T, SBI, Axis Bank and Kotak Bank -- rallying up to 5.24 per cent.
On the other hand, Tata Steel, Sun Pharma, Hero MotoCorp, Vedanta, RIL, Tata Motors, Maruti Suzuki and Bajaj Auto fell up to 2.01 per cent.
Sectorally, BSE finance, realty, bankex, capital goods, industrials, FMCG and power index rallied up to 3.86 per cent.
While BSE metal index fell 1.12 per cent.
Broader BSE midcap and smallcap indices rose up to 1.65 per cent. Meanwhile, the Indian rupee depreciated 36 paise to 72.02 against the US dollar.
Brent crude futures, the global oil benchmark, rose 0.92 per cent to USD 59.34 per barrel.
"Indian markets opened higher following policy stimulus announcement by Finance Minister on Friday with a raft of measures," said Narendra Solanki, Head Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares & Stock Brokers.
"Domestic markets recovered from the day's low in afternoon session as news of China's willingness to negotiate on US-China trade raised hopes of traders with added to the already positive domestic sentiments," Solanki said.
In Asia, Shanghai Composite Index, Hang Seng, Kospi and Nikkei ended significantly lower.
Equities in Europe were trading a tad higher in their respective early sessions.
The 30-share index was trading 205.70 points, or 0.55 per cent, higher at 37,274.63 at 0930 hours, while the broader Nifty rose 61.35 points, or 0.56 per cent, to 11,009.65.
In the previous session, the BSE barometer ended 382.91 points, or 1.02 per cent, lower at 37,068.93, and the Nifty shed 97.80 points, or 0.89 per cent, to finish at 10,948.30.
Top gainers in the Sensex pack in early trade on Friday included Tata Steel, Vedanta, TCS, Yes Bank, ONGC, Tata Motors, HDFC twins, SBI, IndusInd Bank and ICICI Bank, rising up to 3 per cent.
On the other hand, TechM, HCL Tech, TCS, Bharti Airtel, Infosys and Asian Paints fell up to 1 per cent.
Investor sentiment recovered tracking firm cues from global markets, traders said.
Bourses in Shanghai, Hong Kong, Korea and Japan were trading on a positive note in their respective late morning sessions.
Exchanges on Wall Street too ended in the green on Thursday.
Market is also awaiting the government's official estimate of GDP growth for Q1 FY20 to be released later in the day.
Meanwhile, the Reserve Bank of India on Thursday played down deepening slowdown as just "soft patch mutating into a cyclical downswing".
In the annual report for FY19, the central bank conceded that diagnosing the exact problems was "difficult", but reiterated that the issues were not structural in nature.
Foreign portfolio investors sold shares worth a net of Rs 986.58 crore on Thursday, while domestic institutional investors purchased shares worth Rs 489.23 crore, provisional data showed.
The rupee, meanwhile, appreciated 11 paise against its previous close to trade at 71.68 in early session.
Global oil benchmark Brent crude was trading 0.17 per cent higher at 60.59 per barrel.
After touching a high of 37,421.13, the 30-share index was trading 129.68 points, or 0.35 per cent, higher at 37,400.50 at 0940 hours, while the broader Nifty rose 34.65 points, or 0.31 per cent, to 11,070.35.
In the previous session, the BSE barometer ended 125.37 points, or 0.34 per cent, higher at 37,270.82. Similarly, the broader NSE Nifty rose 32.65 points, or 0.30 per cent, to finish at 11,035.70.
Top gainers in the Sensex pack on Wednesday included Tata Steel, ICICI Bank, IndusInd Bank, ONGC, Vedanta, Sun Pharma, HDFC, SBI, M&M, Maruti and HCL Tech, rising up to 2.43 per cent.
On the other hand, Yes Bank, Tata Motors, Bharti Airtel, Bajaj Auto, Infosys and Axis Bank fell up to 2.72 per cent.
On Wednesday, foreign portfolio investors bought shares worth a net of Rs 266.89 crore, and domestic institutional investors purchased equities worth Rs 1,132.42 crore, provisional data showed.
Besides positive cues from global markets, domestic investors are waiting factory output and inflation data, scheduled to be released later in the day, traders said.
"The recent announcement related to government's intent to front load capital investments in infrastructure development to support the economy has also boosted the sentiments," said Gaurav Dua, Senior VP, Head Capital Market Strategy, Sharekhan by BNP Paribas.
Elsewhere in Asia, bourses in Shanghai, Japan and Korea were trading in the green in their respective late morning sessions amid hopes of a resolution in the US-China trade tiff and expectations that the European Central Bank would kick off monetary easing by global central banks.
On Wall Street, bourses ended significantly higher on Wednesday.
The rupee, meanwhile, appreciated 33 paise against its previous close at 71.33 in early session.
Global oil benchmark Brent crude rose 0.43 per cent to 61.24 per barrel (intra-day).
Selling acitivity was witnessed across sectors and the key indices remained in the red throughout the day. Stock-wise, Yes Bank lost the most, by over 15 per cent.
The Sensex closed at 36,093.47, lower by 470.41 points, or 1.29 per cent, than the previous close of 36,563.88 points. It had opened at the intra-day high of 36,613.93 points and touched a low of 35,987.80 points.
The Nifty50 on the National Stock Exchange closed at 10,704.80, lower by 135.85 points, or 1.25 per cent, than its previous close.
The BSE Oil and Gas index fell 1.94 per cent during the day, as global crude oil prices continued to rise following the weekend drone attack on Saudi oil facilities. Brent crude oil futures were around $65 per barrel, higher by 2.22 per cent from its previous close.
The only stocks which gained on the Sensex on Thursday were Tata Motors (up 1.97 per cent) and Tata Motors (DVR) (1.43 per cent) followed by HDFC Bank, Bharti Airtel and Asian Paints.
On the other hand, the major losers were Yes Bank (down 15.52 per cent), Tata Steel (3.66 per cent), IndusInd Bank (3.59 per cent), ICICI Bank (3.16 per cent) and Maruti Suzuki India (2.55 per cent).
In a major booster to the market, the government has decided to not levy the enhanced surcharge introduced in the Budget on capital gain arising on sale of equity shares in a companies liable for securities transaction tax.
Also, the super-rich tax will not to apply on capital gains from sale of any security including derivatives in hands of foreign portfolio investors.
In another relief, the minister said listed companies which have announced buyback of shares prior to July 5 will not be charged with super rich tax.
The government has also slashed corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies.
Sitharaman said the revenue foregone on reduction in corporate tax and other relief measures will be Rs 1.45 lakh crore annually.
This, she said, is being done to promote investment and growth.
The 30-share index zoomed 1326.65 points, or 3.68 per cent, to 37,420.12 at 1120 hours, while the broader Nifty rose 362.95 points, or 3.39 per cent, to 11,067.75.
Top gainers in the Sensex pack included Maruti, M&M, HDFC Bank, Tata Motors, Yes Bank, Tata Steel, L&T, ICICI Bank, Bajaj Auto and RIL, rallying up to 9 per cent.
On the other hand, TCS and NTPC were trading in the red.
The rupee too appreciated 66 paise to 70.68 against US dollar following the finance minister's announcements.
After rallying 565 points during the day, the 30-share Sensex ended 396.22 points, or 1.03 per cent, higher at 38,989.74. The broader NSE Nifty soared 133.10 points, or 1.22 per cent, to end at 11,573.30.
Top gainers in the Sensex pack included Vedanta, M&M, ICICI Bank, Tata Steel, ONGC, Maruti, IndusInd Bank, L&T, Hero MotoCorp, Bajaj Finance and Kotak Bank, surging up to 6.47 per cent.
On the other hand, Yes Bank, Infosys, HUL, HCL Tech, HDFC, NTPC, PowerGrid and TCS dropped up to 4.93 per cent.
According to traders, domestic investors followed cues from global markets that rallied after US President Donald Trump said a trade deal with China could happen sooner than expected.
In Asia, Hang Seng, Nikkei and Kospi ended significantly higher, while Shanghai Composite Index settled in the red.
Stock exchanges in Europe were also trading significantly higher in their respective early sessions.
The market rose further as September futures and options expired, experts said, adding that investors were also optimistic ahead of the Reserve Bank's policy review meet next week.
On the currency front, the rupee appreciated 8 paise to 70.95 against the US dollar (intra-day).
Brent crude futures inched up 0.26 per cent to USD 62.65 per barrel.
The 30-share index was trading 170.98 points, or 0.45 per cent, lower at 38,006.97 at 0930 hours. Similarly, the broader NSE Nifty fell 48.60 points, or 0.43 per cent, to 11,264.70.
Top losers in the Sensex pack during early session included SBI, ICICI Bank, Tata Motors, Yes Bank, Tata Steel, Axis Bank, HDFC twins, M&M, Bajaj Finance and IndusInd Bank, shedding up to 2.66 per cent.
On the other hand, Bharti Airtel, RIL, Infosys, TCS and Sun Pharma advanced up to 5 per cent.
In the previous session, the BSE barometer surged 645.97 points or 1.72 per cent to end at 38,177.95, while the Nifty zoomed 186.90 points or 1.68 per cent to 11,313.30.
Foreign institutional investors (FIIs) remained net sellers in the capital market, pulling out Rs 485.24 crore on Wednesday, while domestic institutional investors bought shares worth Rs 956.26 crore, data available with stock exchange showed.
Elsewhere in Asia, bourses in Shanghai, Hong Kong and Tokyo were trading on a positive note in early trade amid hopes of a trade deal between the US and China as they hold the next round of trade negotiations on October 10. Exchanges in Seoul were trading in the red.
Stocks on Wall Street ended on a positive note on Wednesday.
The rupee, meanwhile, appreciated 5 paise against its previous close to trade at 71.02 in early session.
Brent futures, the global oil benchmark, fell 0.17 per cent to USD 58.22 per barrel.