Since we published our Duane Morris Alert on 19 June 2015 reviewing the Indian Government’s applicability of minimum alternate tax (MAT) on foreign portfolio investors (FPIs), the A.P. Shah committee has recommended to the Finance Ministry that MAT should not be imposed on FPIs for the period preceding 1 April 2015.

If this recommendation is accepted, FPIs would no longer face levies on historical capital gains. The Finance Ministry had exempted FPIs from MAT beginning on 1 April 2015, but had not made the clarification retroactive in the Union Budget 2015.

A related matter is pending in the Supreme Court of India, which comes up for hearing in September 2015, and it is likely that the Finance Ministry will put forth the A.P. Shah committee’s recommendation as the government’s stance to accord a stamp of judicial approval to the retroactive non-application of the MAT provisions.

This update on the current position is an encouraging sign for FPIs, but there is still a possibility that FPIs are being pursued by the Income Tax Department in India for assessment proceedings for historical capital gains.