Pranab willing to waive MAT on insurance firms

New Delhi: In a move that can provide relief to insurance companies, banks and electricity companies, finance ministry has told a house panel that it is willing to waive Minimum Alternate Tax (MAT) for these companies.

This is very significant news post the meeting that the house panel on finance led by Yashwant Sinha had on Friday. It is the second meeting in recent days before the final meeting which will happen on March 2.

According to sources in the standing committee, the finance ministry has informed the standing committee that it is willing to change the clause 104 on booked profits in the DTC, which proposed to impose MAT on insurance companies, banks and electricity companies and will consider waving this proposal. The finance ministry has also told the house panel that it will amend clause 104 on this account.

Because of misuse that had happened with regard to the NRI tax residency status, the DTC had proposed to cut down the period to 60 days, but after a much back and forth the house panel has finally suggested 120 days. Although earlier the house panel had recommended 182 days.

The finance ministry is also willing to consider the suggestion of MPs on the capital gains treatment with regard to conversion of partnership firms to limited liability partnerships (LLPs). It has told the house panel that it will amend that clause and no capital gains will be considered on conversion of partnership firms to LLPs.

This clause impacts some of the biggest corporate names in India because a lot of them have partnership firms, which have been converted into LLPs for tax purposes. This news will provide relief to them.

With regard to the proof of payment of dividend distribution tax on the taxpayer, a crucial clause in the DTC, the finance ministry has indicated that it is willing to reconsider this and the onus of payment will be on those who benefit from this.

This will now be finalized on March 2. The finance ministry has told the standing committee that this has no bearing on the Budget and none of these are being considered for the upcoming Budget. But, as far as the DTC is concerned, this is absolutely happening.