100 foreign funds may hit $10-bn tax demands
In the biggest-ever tax demand slapped on them, nearly 100 foreign funds have been asked to cough up an estimated $5-6 billion for 'untaxed gains' made by them in the Indian markets over the past years.
The number of affected investors can rise substantially as assessments are still in progress and notices could be served in many more cases, taking the overall tax demand from them to well over $10 billion, sources said.
Spooked by these retrospective notices and assessment orders, the foreign investors have begun lobbying intensely with the policy makers and regulators, while stating that the move goes against the government's stated position of providing a 'non-adversarial and stable tax regime'.
Till March 31, close to 100 FIIs got
notices from the Tax Department for a controversial Minimum Alternate Tax (MAT)
of 20 per cent, while they are now being followed up with Assessment Orders.
The FIIs have, however, decided to challenge the tax demands, stating that MAT cannot be levied on FIIs or FPIs as they do not earn any 'business income' in India and their income is defined as 'capital gains' under the I-T Act.
many of whom have now converted themselves into Foreign Portfolio Investors
(FPIs), include entities from the US and Europe as also those operating through
Singapore, Hong Kong and Mauritius.
Among others, the issue has been raised by FIIs with Finance minister Arun Jaitley, Minister of State for Finance Jayant Sinha, capital markets regulator Sebi, the Central Board of Direct Taxes and the top Finance ministry officials, while they are now planning to approach Prime Minister to intervene in the matter.