Finance minister Arun Jaitley ends MAT row, makes peace with RBI

New Delhi: Seeking to calm investor jitters, finance minister Arun Jaitley on Thurs-day offered tax relief to FIIs by exempting some of their income from MAT and announced that an “extremely simplified” income tax return form will soon replace the controversial 14-page ITR that sought details of all bank accounts and foreign trips.

Replying to the debate on the Finance Bill, 2015, in the Lok Sabha, he said that the Prime Minister’s social security schemes will be exempt from service tax and also tinkered with indirect tax rates on raw silk, iron ore and rubber.

With funds fleeing India as the row over 20 per cent minimum alternate tax (MAT) on capital gains they made in past three years escalated, Mr Jaitley offered relief by exempting income foreign firms earned from securities transactions and interest, royalties and fees for technical service from MAT.

The exemption would apply only in those cases where the normal tax rate is below 18.5 per cent. He, however, offered no relief retrospectively as has been demanded by foreign portfolio investors.

The rules for the application of MAT for real estate investment trusts were also eased. Later, the Finance Bill was passed by voice vote, bringing to close the three-stage budget process in the House.

On the indirect tax side, export tax on low-grade iron ore was cut to 10 per cent from 30 per cent, in a bid to boost shipments of the steelmaking raw material from Goa. The new duty structure will be applicable from June 1, Mr Jaitley said.

Referring to the controversial new ITR form, he said an “extremely simplified” income tax return form will soon be brought. “I am having the entire matter reviewed and very soon you will hear an extremely simplified procedure coming for us,” he said. “Recently, a controversy did come up. There is an old income tax form of 12 pages which was made thirteen-and-half pages. I was out of the country when this was done, I had it stopped.”

Buying peace with RBI, Mr Jaitley dropped plans for the time being to strip the central bank of powers to regulate government bonds and give it to an independent agency.

He exempted service tax on life insurance provided under PM Jeevan Jyoti Bima Yojana and PM Jan Dhan Yojana as well as on general insurance business under the PM Suraksha Bima Yojana.