Government likely to provide relief to FIIs on MAT

The government is considering providing relief to foreign institutional investors on the issue of levying minimum alternate tax (MAT), a move that is expected to brighten the mood of investors and help stabilize the jittery markets. 

The latest view on the issue comes after a panel set up by the government backed the idea of providing relief to FIIs. This is being seen as a rethink on the part of the government keeping in view the wider implication on the economy Stock Market Trading Tips

"The AP Shah committee has favoured providing relief to FIIs on levy of MAT prior to April 1, 2015. The government is favourably considering the issue of providing relief," a government source said but did not elaborate. 

The move came on a day when the stock market fell sharply and the rupee inched closer to 66 to a dollar, triggering anxiety among policymakers battling with wobbly financial markets for the past few weeks. It will also help blunt investor criticism about policy uncertainty in India. 

The Centre had set up the high-level panel to examine the issue of MAT on foreign institutional investors (FIIs) in May, after angry foreign investors had protested the tax notices sent to them. 

Experts said the move is expected to boost foreign investments Himanshu Tiwari Astrologer Blog

"Non-levy of MAT on FIIs prior to April 1, 2015 would be a very welcome move to boost foreign investments into the country. This would restore confidence amongst foreign investors and would be another step for the government to tell the globe that they mean business and are willing to quickly bring in certainty on critical issues," Girish Vanvari, National Head of Tax, KPMG in India. 

"However,the exuberance could be higher if MAT is removed for all foreign companies (whether FII or not)," he said. 

The tax department's notice to FIIs to pay MAT on capital gains had triggered a row with angry FIIs writing to the Centre to have a rethink. The tax department had moved swiftly to contain the damage saying that MAT on the capital gains made by overseas funds in Indian stock markets would not be applicable, if the money was routed through countries such as Mauritius, Singapore and others with which India has signed double taxation avoidance agreements Indian stock market astrology prediction

The government has maintained that the decision to levy MAT on foreign portfolio investors was taken not by the NDA government but by quasi-judicial bodies. The finance ministry had said that these rulings can be contested in higher courts, which will respect the due process and have the power to quash faulty decisions. 

Sensing the anxiety among foreign investors and the barrage of criticism for launching a fresh round of "tax terrorism," the government put on hold fresh notices to FIIs on MAT. 

Tax experts cheered the move. 

"The recommendations of the Shah Committee are indeed welcome. It is expected that the government will accept the committee's suggestions and stop demanding MAT from FPIs for the period before April 1 2015. It is also expected that when the Castleton case comes up for hearing before the Supreme Court, the government's position before the court will be that FPIs should not be liable to MAT. This will likely result in the Supreme Court reversing the ruling of the AAR (Authority on Advance Ruling)," said Rajesh H Gandhi, partner, Deloitte Haskins & Sells LLP Share Market Astrology

Since October-November 2014, the income tax department had sent notices to about 70 FIIs to pay minimum alternate tax (MAT) for previous assessment years totalling Rs 603 crore. The notices from the IT department were based on a ruling by a tax appellate authority in a 2012 case that involved transfer of shares by Castleton, a Mauritius-based FII, to a Singapore-based entity. 

According to some estimates, if the IT department opened all the cases going back up to seven years, the total tax obligation on FIIs would be in the range of Rs 30,000 crore to Rs 40,000 crore. This figure was later scaled down. 

The move to issue notices had raised fears among FIIs that even though most of them are exempt from paying any tax in the country due to India's double tax avoidance treaty with countries such as Mauritius, Singapore, Cyprus and some other countries, the government will tax them under MAT Jackpot Stocks Trading Tips

On one hand this had led to legal cases against the government by FIIs and also FII selling aggregating about $2.5 billion between April and June this year. Following these developments the government set up the A P Shah committee to suggest whether FIIs should be taxed under MAT or not. 

The dispute related to income tax assessment years prior to the current financial year which started on April 1, 2015. This is because in the last Budget, finance minister Arun Jaitley passed a law which said MAT was not applicable on FIIs' income from India Financial Astrology