Foreign funds move Bombay HC against MAT as Jaitley offers relief

Finance Minister Arun JaitleyFive foreign portfolio investors (FPIs) have moved the Bombay high court challenging the applicability of minimum alternate tax (MAT) on capital gains arising from trading in securities even as finance minister Arun jaitley today offered to exempt foreign portfolio investors from MAT.

The FPIs challenging the tax include the National Westminster Bank, three international fund houses, including First State Asia Pacific Sustainability Fund, First State Indian Subcontinent Fund, First State Global Emerging Market Sustainability and BNP Paribas.

With funds threatening to flee Indian markets over the 20 per cent MAT on capital gains they made in past three years, Jaitley offered relief by exempting income foreign firms earned from securities transactions and interest, royalties and fees for technical service from MAT.

The exemption would apply only in those cases where the normal tax rate is below 18.5 per cent.

He, however, offered no relief retrospectively as has been demanded by foreign portfolio investors.

The finance minister also eased rules for the application of MAT for real estate investment trusts.

Replying to the debate on the Finance Bill, 2015 in Lok Sabha, he said prime minister's social security schemes will be exempt from service tax while also reducing indirect tax rates on raw silk, iron ore and rubber.

On the indirect tax side, export tax on low-grade iron ore was cut to 10 per cent from 30 per cent, in a bid to boost its shipments from Goa.

He also exempted life insurance business provided under Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Jan Dhan Yojana as well as on general insurance business under the Pradhan Mantri Suraksha Bima Yojana and the services provided by contribution collecting agencies in the Atal Pension Yojana from service tax.

The new duty structure will be applicable from 1 June, Jaitley said.

Jaitley also announced that an "extremely simplified" income tax returns form will soon replace the controversial ITR.

Later, the Finance Bill was passed by voice vote, bringing to close the three-stage budget process in the House.