What Is Mat Tax On Fii

Under the indian tax laws equity investors need to pay a 10 per cent 11 96 per cent effective tax on long term capital gains in the case of selling of shares of listed securities when the gains are in excess of rs 1 lakh.

What is mat tax on fii.

The tax department s case for subjecting fiis to mat rests on another ground too. On september 20 finance minister nirmala sitharaman announced the reduction of minimum alternative tax mat for companies from 18 5 percent to 15 percent for those who continue to avail. Economics mains paper 3. Rs 40 000 crore tax.

The union finance minister arun jaitley has since announced that the aggressive tax demands have been put on hold and that a high level committee headed by law commission chairman justice ajit prakash shah would look into the entire gamut of mat on fiis and a few other legacy tax issues and further that the panel would expeditiously. Why issue of taxing foreign investors flares up repeatedly. Minimum alternate tax mat is a tax levied on short and long term capital gains and interest income. What is this mat issue that fiis are lamenting about.

The sections of the tax manual that come up for examination differ the political provenance of the governments differ but the final results do not differ. It is 18 5 of the book profits earned by the company. Many of these investors do not pay tax on capital gains as tax treaties signed by india with some countries notably mauritius and singapore provide for an exemption from tax on gains from investing in stocks. The minimum alternate tax mat is a tax levied under india s income tax act of 1961 that targets companies that show profits on their books and declare dividends but pay minimal or no tax.

They argue that mat may be harsh on fiis operating from dtaa jurisdictions. Why issue of taxing foreign investors flares up repeatedly. No mat on fii. Even if a tax law provision practically nullifies the effect of such a dtaa it must be accepted and the law should be applied as it stands regardless.

Minimum alternate tax mat minimum alternate tax mat is a tax effectively introduced in india by the finance act of 1987 vide section 115j of the income tax act 1961 it act to facilitate the taxation of zero tax companies i e those companies which show zero or negligible income to avoid tax. Representational image file photo dna research archives. Mat is charged at 18 5 and after taking into account surcharges works out to a little over 20. If the tax computed in accordance with the provisions of the income tax act comes out to be less than the minimum alternate tax mat that is 18 5 of the book profits the company has to pay mat to the government.