What Is Mat Tax On Fii

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.

What is mat tax on fii.

Rs 40 000 crore tax. Representational image file photo dna research archives. Why issue of taxing foreign investors flares up repeatedly. 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.

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. 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. Under mat such companies are made liable to pay to the government by deeming a certain percentage of their book profit as taxable income.

Minimum alternate tax mat is a tax levied on short and long term capital gains and interest income. The tax department s case for subjecting fiis to mat rests on another ground too. 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. 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.

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. A 15 per cent tax 17 94 per cent effective is levied if such capital gains are short term in nature less than 1 year. Mat is charged at 18 5 and after taking into account surcharges works out to a little over 20. They argue that mat may be harsh on fiis operating from dtaa jurisdictions.

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. It is 18 5 of the book profits earned by the company. What is this mat issue that fiis are lamenting about. No mat on fii.