<div><em>The government had earlier decision to exempt foreign portfolio investors from the levy of MAT</em><br><br><div>In a big relief to foreign firms, government on Thursday (24 September) exempted them from paying Minimum Alternate Tax (MAT) retrospectively from April 2001, provided they did not have a permanent establishment in India. </div><div> </div><div>This, along with the government’s earlier decision to exempt foreign portfolio investors from the levy of MAT, is expected to completely put the MAT controversy to rest and assuage concerns of foreign investors.</div><div> </div><div>The provisions of Section 115JB of Income Tax will not apply to foreign companies with effect from April 1, 2001, if they are resident of a country with which India has Double Taxation Avoidance Agreement (DTAA) and they do not have a permanent establishment (PE) in India, said an official statement. </div><div> </div><div>In case the companies belong to countries with which India does not have a DTAA, the MAT exemption will apply if they are exempted from registration under Section 592 of the Companies Act 1956, or Section 380 of the Companies Act 2013. </div><div> </div><div>"An appropriate amendment to the Income-tax Act in this regard will be carried out," said the Finance Ministry statement. </div><div> </div><div>Earlier this month, the government had exempted foreign institutional and portfolio investors from payment of MAT on the capital gains made by them before April 1, 2015. </div><div> </div><div>The Budget 2015-16 had already exempted FIIs/FPIs from paying the levy on gains made after April 1.</div><div> </div><div>"Effectively, now all foreign companies have been exempted from MAT," said Rajesh Gandhi, a partner in Deloitte Haskins & Sells LLP.</div><div> </div><div>"It is a major relief as earlier there was no clarity whether foreign firms are liable to pay the tax."</div><div> </div><div>India first introduced MAT during the 1990s to ensure companies paid a minimum amount of tax, normally around 20 percent of profits.</div><div> </div><div>However, it had never been imposed on foreign investors until last year when tax officials, citing a court ruling, started sending notices to foreign funds, including Aberdeen Asset Management.</div><div> </div><div>The notices were challenged in courts. With foreign investors holding a quarter of the shares on the BSE Sensex, the controversy rattled local financial markets and forced Jaitley to set up a panel to resolve the dispute.</div><div> </div><div>Foreign investors have long been critical of India's tax bureaucracy, citing aggressive claims that have led to damaging rows with companies including Vodafone and, more recently, Cairn India.</div><div> </div></div><div>(Agencies)</div>