Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: VAT RATES :: ACCOUNTING STANDARDS :: cpt :: articles on VAT and GST in India :: empanelment :: due date for vat payment :: list of goods taxed at 4% :: form 3cd :: Central Excise rule to resale the machines to a new company :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARD :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT Audit :: TDS
Direct Tax »
 Deadline For Income Tax Returns Filing Only 12 Days Away. 10 Points
 Income Tax: E-assessment ensures greater efficiency in the taxation system
 10 Points Deadline For Income Tax Returns Filing Only 2 Weeks Away.
 Income tax returns (ITR) filing: A step by step guide to check your ITR status online and offline
 How to save tax; amazing tips to make your money stay in your wallet Income tax returns (ITR) filing
 Want to save tax? Here are the best options
 Suggestion For Option To Assessee For Higher And Lower TDS/TCS For Optimization Of Tax Collection And Refunds
 CBDT to conduct nationwide review of tax collection for FY18 today
 Here are a few last-minute tax saving ideas Not planned taxes yet?
 Confessions of a fake CA exposes lacuna in e-filing of tax return
 Greetings from the income tax department

Tax net: Foreign portfolio investors caught in a bind
February, 06th 2015

The tax department has asked a number of foreign portfolio investors (FPIs) to make available their profit-and-loss (P&L) statements and balance sheets, though they are not required to do so in the normal course of filing returns.

Typically, such statements are filed by companies.

The department's move is being seen by tax consultants as part of a larger push to levy Minimum Alternative Tax (MAT) on FPIs. Usually, the tax is applicable only to companies.

The department has sought the financial statements of at least 200 FPIs structured as corporate entities. They had been asked to re-file their returns for the financial year ended March 2014, said a person familiar with the matter.

Tax department has asked foreign investors to re-file returns with financial statements
At least 200 of them have been asked to make submissions
This relates to the financial year ended March 2014
FPIs structured as corporate entities affected
Move seen to be part of push to levy MAT on them
If they refile, tax department could use profit-and-loss statement to levy appropriate MAT
If they don’t, they could face penal action for not filing returns

The tax department levies MAT on companies to ensure a minimum tax payment by those earning substantial incomes but escaping taxation due to various exemptions. This levy works out to about 20 per cent of profits. Experts say if FPIs are to furnish P&L statements, the tax department can calculate the MAT they could charge FPIs structured as corporate entities.

Suresh Swamy, partner (financial services), PwC Tax and Regulatory Service, said the requirement had put clients in a position in which they could face issues either way. "Funds have been asked to re-file returns with a balance sheet and P&L account. If they do it, they could be subject to MAT, based on the P&L amount. If they don't, their tax filing will be invalid and they could be subject to penalty proceedings. This makes it a Catch-22 situation," he said.

However Sunil Badala, partner, BSR & Co, said, "The notices under section 139 (9) might be due to a system error rather than anything to do with MAT."

The number of FPIs asked to explain why MAT should not be levied on them has gone up from a handful in September to at least 50, according to two people familiar with the matter. They said foreign funds had filed representations in this regard and were waiting for further action from the tax department.

"It is our position that there is no MAT payable by foreign portfolio investors, and we have given a representation accordingly," Badala said.

Experts say effectively, a MAT regime acts against the zero per cent long-term capital gains tax and 15 per cent short-term capital gains tax said to be applicable now. If MAT were to be applicable, the effective rate of stock market taxation becomes 20 per cent. This would mean such foreign investors could end up paying higher tax on stock market transactions than domestic investors.

"Primarily, they are relying on a recent decision pertaining to Castleton Investments, according to which MAT can be levied on foreign corporate entities. However, this is an advance ruling and not binding on other taxpayers. It might, at the most, have some persuasive value. In September 2014, the Delhi tribunal, in the case of Bank of Tokyo Mitsubishi, had observed MAT was only payable by companies required to maintain books of accounts under Indian law," said Rajesh Gandhi, director, Deloitte Haskins & Sells.

Now, the tax department is seeking to apply this not only to corporate entities but also portfolio investors structured as corporate entities.

This, experts say, might not stand scrutiny, as FPIs aren't required to maintain a book of accounts under Indian law.

Depository data show foreign investors held a total of Rs 19.03 lakh crore of equity assets and an additional Rs 2.67 lakh crore of debt assets at the end of 2014. A tax official confirmed sending notices in this regard to FPIs, without divulging the number of FPIs who had been sent such notices.

"The opinion of the department will depend on the assessing officer after examining the responses and facts of the case. It will reflect in the order, as and when passed," said an officer on condition of anonymity.

When contacted, the income tax department said it couldn't comment on the issue.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Content Management System developers CMS developers Content Management Solutions CMS Solutions CMS India Content Management System India CMS development India Website CMS Website Content Management India Portal CMS India CMS Outsourcing CMS Vendor Complete CMS Custom CMS Services

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions