Finance Minister Arun Jaitley has announced that the government has decided not to levy Minimum Alternate Tax (MAT) on capital gains made by FIIs retrospectively. The government has accepted Justice AP Shah Panel’s recommendations that there was no basis for levy of such tax for the prior period as well. The government has decided to amend the Income Tax Act to clarify the issue with regard to levy of MAT on FIIs.

Jaitley said legal recourse taken by certain FIIs on being slapped with tax notice would have been time consuming and so the government decided to pursue alternative course for resolving the issue.

FII – Foreign Institutional Investment

Difference Between FII and FDI

The Foreign Direct Investment (FDI) refers to the direct investment into the production and management. FII refers to the investments in the Mutual Funds, Investment Companies, Pension Funds and Insurance Houses. So FII invest in a capital or money market which is not their home country.

FDI brings foreign capital, technology & management. FDI brings in funds with long term commitments. FII brings only foreign Capital. FII does not come with long term commitment. FDI is much more stable than FII. Money invested via FII can be taken back very easily. FII is also called Foreign Indirect Investment.

The Foreign Portfolio Investment is often referred to as “hot money” because of its tendency to flee at the first signs of trouble in an economy.