Exempting foreign institutional investors (FIIs), belonging to the countries having tax treaties with India, from the MAT claims is definitely a positive move and this will encourage the other countries too to enter into tax treaties with India in order to avail tax benefits.
Sai Nikesh | The Dollar Business
In a move to address the concerns being faced by the Foreign Institutional Investors (FIIs), the Government of India, on Friday, assured that FIIs will be able to avail of treaty benefits wherever possible in accordance to the Minimum Alternate Tax (MAT) cases.
The Central Board of Direct Taxes (CBDT) has released a notification to this effect, in which it asked the tax officials to resolve the issues pertaining to the tax claims involving the FIIs.
In this regard, it has asked the tax officers' to expedite ruling on whether an investor can qualify for the tax treaty benefit and hence will be exempt from MAT claims.
Welcoming the move, Adish C Aggarwala, Chairman, All India Bar Association, told The Dollar Business that, "Exempting FIIs, belonging to the countries having tax treaties with India, from the MAT claims, is definitely a positive move and this will encourage other countries too to enter into tax treaties with India in order to avail tax benefits."
In its notification, the CBDT said, "It has come to the notice of the Board that several FIIs receiving income from transactions in securities claim such income as exempt from tax by availing benefit provided in the Double Taxation Avoidance Agreements (DTAAs) signed between India and their respective countries of residence."
"Since the issue involved in such cases is limited, such claims should be decided expeditiously and the decision may be taken on such claims within one month from the date such claim is filed," it added.
This move by the Indian government could create a positive environment in the case of FIIs that come under countries with which India has signed tax benefiting treaties.
However, the move may not seem that positive for the FIIs belonging to the countries that are not in tax treaties with India.
The CBDT circular comes two days after the government has reached out to 1000 FIIs across US, Singapore, Hong Kong and Mauritius, giving them assurance on claims that can be made over the treaty benefits, say the reports.
Prior to this, the government has sent the notices to the FIIs for alleged non-payment of MAT on the capital gains made by them up to March 31, 2015.
A week earlier, the Indian government has pushed for a Rs 40,000 crore tax demand on FIIs after they have lost a case before tribunal against the levy of 20% Minimum Alternate Tax (MAT) on capital gains.
In this regard, the Finance Minister had said that the government has taken decision for abolition of MAT from April 1, 2015, but the said tax demand of Rs 40,000 crore pertains to the tax that is related to an earlier period and waiving off the same after the case has been won, will come under tax haven.
This article was published on April 25, 2015 – 4:33 pm IST.
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