India will not issue any fresh notices to foreign institutional investors (FIIs) for paying minimum alternate tax (MAT), the government said on Monday, in a apparent move to calm investors rattled by unexpected demand of past tax dues.
The income-tax department has also asked all its field officers not to undertake any “coercive action” for recovery of demand already raised on foreign companies by invoking provisions on MAT — a kind of tax on capital gains made by FIIs.
So far, the tax department has issued notices to 68 FIIs seeking Rs 602 crore as unpaid MAT over the past years.
This had spooked investors, prompting funds to move out money from Indian markets.
The rupee slumped past 64 to the dollar and equity markets took a hammering with the BSE Sensex falling by nearly 1,000 points in two days last week. Markets, however, rebounded smartly after finance minister Arun Jaitley, on Thursday, announced the setting up of a panel under Justice AP Shah to look into the issue of MAT on FIIs.
“In the light of finance minister’s announcement, no coercive action be taken for recovery of demand already raised by invoking provisions of MAT in the cases for foreign companies,” the Central Board of Direct Taxes (CBDT) said in a circular on Monday.
The circular also clarified that the “issue of fresh notices for reopening of cases, as also completion of assessment, should also be put on hold unless the case is getting barred by limitation.”
The finance ministry has asked the panel to submit its report expeditiously.