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Finance Minister Arun Jaitley on Thursday tried to soothe the Reserve Bank of India and Foreign Institutional Investors by making changes to the Finance Bill.
The Finance Bill for 2015-16 was passed in the Lok Sabha today.
To make peace with the RBI, Jaitley deferred the plan to set up a Public Debt Management Authority (PDMA), which would have taken away the central bank’s power of regulating the Government’s borrowing market. The Bill had also proposed that SEBI will regulate the government securities market.
“Since the RBI has been handling public debt management, the Government, in consultation with the RBI, will prepare a detailed roadmap that will separate RBI’s debt management and market infrastructure functions and have a unified financial market. It has, therefore, been decided to delete the PDMA provisions from the Finance Bill for this financial year,” he said while moving the Bill for debate and approval in the Lok Sabha on Thursday.
He also clarified that the Centre was committed to unifying the financial market both by making government securities a part of this market and also by creating a proper bond-currency derivative nexus.
Jaitley tried to give some relief to the FIIs by exempting certain categories of income from Minimum Alternate Tax (MAT). “I propose to provide that amount of income arising or accruing to a foreign company from capital gains arising on transactions in securities, interest, royalty or fee for technical services chargeable to a tax at a lower rate than 18 per cent shall not be liable to MAT,” he said.
Stating that MAT on FIIs has been done away with from April 1, 2015, the Finance Minister said the issue of levy of the tax in past cases was now pending in the Supreme Court. “On Wednesday, the matter was mentioned. The Supreme Court has said they will fix a hearing date after the summer vacation,” he said.
Commenting on the MAT relief on certain categories of transaction, Rajesh H Gandhi, Partner, Deloitte Haskins & Sells LLP, said that this will bring a relief to debt funds because interest income will also be exempt from MAT from April.
“However, unfortunately and as expected, the Government has not provided any relief for the past period. This will also provide relief to private equity funds though only for the future,” he said.
Sameer Gupta, Tax Leader for Financial Services, EY India, said Jaitley has expanded the base for MAT to all foreign companies.
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