Initially foreign investors were optimistic about India's
budget proposals, which deferred the General Anti-Avoidance
Rules (Gaar) and reduced the corporate tax rate. But a
little-noticed exemption means foreign investors could be
liable for an 18% minimum alternate tax (MAT) – and it
will be applied retroactively.
A Finance Bill provision exempts foreign institutional
investors (FIIs) from paying MAT on capital gains from a narrow
band of securities transactions. Counterintuitively, that
exemption has harmed India's investment environment.
Previously MAT applied only...