In what could soothe investors’ frayed nerves, a government-appointed panel has recommended against retrospective imposition of minimum alternate tax (MAT) on foreign institutional investors (FIIs).
The government is learnt to “favourably” considering the suggestion, a source said.
“The AP Shah committee has recommended giving MAT relief to FIIs for a period prior to April 1,2015 and the government is favourably considering it,” the source added.
Uncertainties over MAT — a kind of tax on capital gains made by foreign portfolio investors (FPIs) — have prompted overseas funds to pull out money from India.
The tax department had issued notices to 68 FIIs seeking Rs 602.83 crore as unpaid MAT at the rate of 20% on capital gains made by FIIs over the past few years. This had raked up a big controversy with FIIs moving the higher court challenging the MAT demand.
Finance minister Arun Jaitley had in the budget for 2015-16 proposed to scrap MAT.
In May, the government had tasked a special panel headed by justice AP Shah, the chairman of the Law Commission, to look into the applicability of MAT.
Former chief economic adviser Ashok Lahiri and chartered accountant Girish Ahuja were the other two member of the panel.
The tax notices for retrospective imposition of MAT on foreign investors had sparked a legal row.
The contents of the 66-page report have so far not been made public and the government wanted to firm up its views as the Supreme Court was examining the legality of the tax.
Foreign investors have invested about $20 billion in Indian stocks in the past year and $28 billion in bonds.