Union finance Ministry exempted MAT for foreign investors

Union finance Ministry on 30 April 2015 exempted Minimum Alternate Tax (MAT) for foreign investors.

During the Finance Bill debate in Parliament, Union Finance Minister Arun Jaitley said that MAT would not be applicable on foreign companies’ earning from capital gains on securities, royalty, fee on technical services and interest.

However, MAT would not be applicable on sale of units of real estate investment trusts (REITs). Further, the exemption would apply only in those cases where the normal tax rate is below 18.5 percent.

The issue between foreign investors and the government cropped up in 2014-15 when the tax department started sending notices to FIIs to cough up MAT.

Total 68 notices were sent to FIIs for their past capital gains up to 31 March 2015 creating a huge uproar.

The government has been trying to soothe the foreign institutional investors, who turned net sellers for the first time since April 2014.

Minimum Alternate Tax

MAT is a way of making companies pay minimum amount of tax. It is applicable to all companies except those engaged in infrastructure and power sectors. Income arising from free trade zones, charitable activities, investments by venture capital companies are also excluded from the purview of MAT.

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