Finance Minister Arun Jaitley’s announcement of MAT exemption on certain incomes of foreign firms was a relief but the government should have clarified on the tax treaty benefits for past dues, tax experts said today.

Replying to a debate on Finance Bill in Parliament, the Minister said all capital gains from sale of securities as well as royalties, interest, technical services fee earned by foreign companies will be exempt from MAT, if the normal tax rate on such income is lower than 18.5 per cent.

Commenting on this, PwC Partner (Tax and Regulatory Services) Suresh Swamy said, “Finance Minister could have clarified that FPIs with treaty benefits would be exempt from paying MAT for past year. That would have given more confidence to foreign investors“.

He said probably clarity on these past tax notices would come after six months when the Supreme Court decides on the case of Mauritius—based Castleton Investment Ltd.

EY Leader (Business Tax) Sunil Kapadia said the foreign investors were looking for certainty and clarity in taxation matters from the Minister.

“The clarification does not provide what happens for taxation of past period. That still remains a controversial area,” Kapadia said.

This issue between foreign investors and government cropped up last year when the tax department started sending notices to FIIs to cough up MAT.

These notices were based on a decision by Authority for Advance Ruling, which directed Castleton to pay MAT in India on their book profits.

So far, the government has sent MAT notices for over Rs 602 crore to 68 foreign investors.

The amendments to Finance Bill would bring relief to debt funds because interest income of debt funds will also be exempt from MAT from April this year.

Deloitte Haskins & Sells Partner Rajesh Gandhi said the announcement is positive for debt funds as MAT on interest would have been costly for them.

“The government has made it clear that going forward MAT would not be applied on foreign investors. Some clarification on FIIs being able to avail treaty benefits and not be subject to MAT should have been made clear,” Gandhi said.

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