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Rs 40,000 crore tax: Is Jaitley still the darling of foreign investors?

FIIs went to a tribunal, which is called Authority for Advance Rulings (against levy of 20 per cent Minimum Alternate Tax on capital gains). They got a judgement against themselves. "So, the tribunal has decided against them. The amount involved is Rs 40,000 crore."

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Finance Minister Arun Jaitley
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One of the major cheers that the investor community gave to Finance Minister Arun Jaitley was when he announced no retrospective taxation, or tax terrorism, as it has come to known. With his latest demand of Rs 40,000 crore from foreign investors on capital gains, he is unlikely to carry on the "friendly" sentiments. 

However, he has made it amply clear that India isn't a tax haven and only gains made prospectively will not be taxed. All the issued that have been ongoing from the past must be resolved and tax be paid if such ruled. 

In an interview with Zee Business, Jaitley made it clear that the government has decided not to levy any more retrospective taxes but the cases which have been ongoing need to be resolved through necessary channels. He said, "It's not possible to scrap old notices and rules. And I am accepting all rulings that are in favour of the assessee." 

The latest in the series after the new NDA government came to power is the IT department's notice to Cairn India worth Rs 20,500 crore for a deal that took place in 2011. 

Cairn India has sought legal route to find its way out of this liability. 

Also Read: Government to press ahead with Rs 40,000 crore tax demand on FIIs: FM

But the larger picture is unraveling with respect to the foreign institutional investors (FIIs) who lost a case at a tribunal and are being pressed to pay a whopping Rs 40,000 crore as capital gains tax. 

Jaitley, in the interview, made is very clear that FIIs lost their case at the appellate authority and thus, a logical conclusion has been reached. He said that the FIIs are now expected to pay up as per the ruling. He said, ""FIIs went to a tribunal, which is called Authority for Advance Rulings (against levy of 20 per cent Minimum Alternate Tax on capital gains). They got a judgement against themselves. "So, the tribunal has decided against them. The amount involved is Rs 40,000 crore."

Arun Jaitley Finance Minister of India

We are reasonable, so for the future I have waived it (retrospective tax). But the tax demand after winning the case, if I waive off, we will be like a tax haven ....how would be I answerable to Parliament that after the case I just waive Rs 40,000 crore.

Although the new government has abolished the tax from April 1, 2015 but cases arising out of prior period need to be resolved. Jaitley argued that investors want taxes from the previous government's time to be waived off which isn't going to happen. "To which I responded and said 'we are reasonable, so for the future I have waived it. But the tax demand after winning the case, if I waive off, we will be like a tax haven ....how would be I answerable to Parliament that after the case I just waive Rs 40,000 crore," he said.

Clearly, the message from the government was misread and clarification has been issued. Even though no new cases will be opened but those pertaining to earlier government and belonging to before 2014-era will be solved as per the law. 

Investors thought that they could run away with massive gains made on their capitals on the past decade but that is unlikely to happen. 

'India is not a tax haven," Jaitley has said in simple words. 

(with agencies)

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