Clarity on MAT issue likely in Finance Bill

NEW DELHI: Finance ministry is considering issuing clarifications to the rules relating to Minimum Alternate Tax (MAT) on foreign portfolio investors (FPI) proposed in the budget. “Clarificatory amendments to MAT rules are under consideration of the government,” minister of state for finance, Jayant Sinha, on the sidelines of a conference held on climate change.

The budget has clarified that capital gains on transactions in securities which are liable to tax at a lower rate will not be subject to MAT. However, this provision is applicable prospectively and there is no relief for earlier years. Income tax department has sent notices to many foreign investors levying tax on the profits made by them, reviving again the ‘tax terrorism’ charge on Indian tax department.

The MAT demand runs into thousands of crores. The government could in reply to the budget clarify that the levy will not apply to investors from countries with which India has a tax treaty, such as Mauritius and Singapre. On Wednesday, Sinha along with senior finance ministry officials, including revenue secretary Shaktikanta Das, Anita Kapoor, chairman, central board of direct taxes (CBDT) had told investors in a conference call that MAT would not be levied on funds invested through countries such as Singapore and Mauritius with which India has a double taxation avoidance agreement (DTAA).

“FIIs domiciled in countries with DTAA will get the benefit of the tax treaty. Funds domiciled in Mauritius and Singapore will not have any MAT liabilities,” finance ministry officials had said in their interaction with investors.