Finance minister Arun Jaitley on Thursday clarified that minimum alternate tax (MAT) would not be applicable on foreign companies’ earning from capital gains on securities, royalty, fee on technical services and interest, providing a huge breather to foreign investors.

Replying to the debate on the Finance Bill, 2015, in the Lok Sabha, the finance minister said that the exemption would apply prospectively only in those cases where the normal tax rate is below the MAT rate of 18.5 per cent, even as he assured the taxpayers to replace the 14-page long ITR with an “extremely simplified” income tax return (ITR) form.

With the 68 notices sent to FIIs for their past capital gains up to March 31 creating a huge uproar, the government has been trying to soothe the foreign institutional investors, who turned net sellers for the first time since April 2014. The minister also clarified that the MAT would not be applicable on sale of units of real estate investment trusts (REITs).

Adopting 41 amendments, adding three new clauses and dropping six provisions from the Finance Bill, 2015, Jaitley said that while MAT on FIIs was done away with beginning April 1, 2015, the “legacy issues” regarding levy of the tax in past cases was now pending in the Supreme Court.

“Yesterday (Wednesday), the matter was mentioned. The Supreme Court has said they will fix up after the summer vacation some date of hearing and that is not an issue I have announced today (Thursday),” he said.

The development will bring cheers to foreign investors earning income from interest on bonds, and private equity earning capital gains.

Sameer Gupta, tax leader for financial services, EY India, said that the finance minister has expanded the base for MAT carve out from FPIs to foreign companies earning the specified income streams. “That means private equity funds earning capital gains and interest income will have the necessary clarity on non-applicability of MAT to them,” Gupta said.

The Bill was also amended to drop the phrase “at any time” from the definition of the place of effective management, which was introduced to curb the formation of shell companies, which are located abroad but controlled from India to evade taxes. The phrase had unsettled the industry, which argued that it was leading to unintended ramifications.

Hailing the amendments, Amit Maheshwari, partner, Ashok Maheshwary and Associates, said that the provision was very damaging and the clarification will avoid some unintended tax consequences.

With regards to the clarification on MAT, tax experts said that while the move was welcome, the government has not specifically stated that FPIs claiming treaty benefit would be

The Finance Bill was later passed by voice vote, bringing to close the three-stage budget process in the House.