Indian tax authorities are reportedly seeking to apply India’s MAT to Foreign Portfolio Investors (FPIs) (and to Foreign Institutional Investors (FIIs) under the previous regime) in relation to their gains from Indian Offshore Derivative Instruments (ODIs). While India’s finance minister clarified that capital gains earned by FPIs from 1 April 2015 would be excluded from “book profits” in computing MAT for the year 2015-16 (though this is yet to be officially enacted), India’s tax authorities have been taking steps to collect MAT in relation to ODI activity prior to 1 April 2015. This in effect applies a retrospective tax, disregarding the more favourable current tax regime. A legal battle between FPIs and the Indian tax authorities is therefore likely to result. Clients who have historically dealt in ODIs directly as an FPI or FII should consider seeking advice from Indian tax counsel. For any clients that have traded ODIs with FPIs or FIIs as a synthetic market access product, any tax indemnities that may have been given to counterparties should be assessed to see whether a retrospective MAT charge could be an indemnifiable tax. For any clients that may be in the process of setting up new ODI trading relationships, it is important to ensure that only the appropriate risks are assumed (as we have seen some very wide indemnities being requested).