NEW DELHI: Indian government provided some relief to overseas investors on the contentious issue of minimum alternate tax (MAT).
Finance minister, Arun Jaitley, said that foreign portfolio investors (FPIs) parking funds in bonds, private equity funds as well as multinationals earning royalty or technical fee that face levies that are lower than the 20% minimum alternate tax (MAT) will not be subjected to this levy from April 1.
The changes, announced before the Finance Bill was put to vote, are in addition to the exemption given to FPIs from payment of MAT on capital gains made by them, while dealing in shares on Indian exchanges. At the same time, Jaitley clarified that the case related to MAT demand for period prior to the April cut-off will be decided by court.
“A big ask for the debt FPIs was the exclusion of interest income from MAT liability. The concessional rate of 5% introduced two years back would have become redundant if MAT were to apply. Now, the FM has provided relief on this, and that is a welcome step. Of course, all this is for prospective applicability, effective April 1, 2015 and as has been indicated by the government, the past years will hence necessarily have to be decided by the judicial process through courts,” said Sameer Gupta, tax leader for financial services, consulting firm EY India.
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