MAT to be waived for FIIs

Union Finance Minister Arun Jaitley announced on Tuesday that the Narendra Modi government had decided to waive the controversial minimum alternate tax (MAT) on capital gains made by Foreign Institutional Investors (FIIs) prior to April 1, 2015. The decision, to be carried out through an amendment to the Income Tax Act, is likely to come as a big relief to FIIs that pulled out more than Rs. 17,555 crore ($2.65 billion) from India in August. “The Justice A.P. Shah Committee has said that there is no legal basis for levying 20 per cent MAT on past capital gains … it is not leviable,” Mr. Jaitley told reporters.

“The Government has accepted the recommendation … and to clarify the inapplicability of MAT to FIIs/FPIs [foreign portfolio investors] an appropriate amendment will be carried out in the next session of Parliament.”

Through the amendment, the government proposes to clarify that MAT provisions will not be applicable to FIIs/FPIs not having a place of business/ permanent establishment in India for the period prior to 1.4.2015, said a release issued later.

Pending such amendment, the Central Board of Direct Taxes will convey to the field formations the decision of the government to accept the recommendation, it said. The A.P. Shah Committee that submitted its report to Mr. Jaitley on July 25 was appointed by the government to go into the question of levy of MAT on capital gains made by FIIs. Mr. Jaitley exempted FIIs from the levy from April 1 onwards through a provision in the Budget for 2015-16.

The decision to be carried out through an amendment to Income Tax Act

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