Union finance minister Arun Jaitley has termed tax notices sent to around 100 overseas funds as as legitimate tax demand and not tax terrorism. Jaitley said taxes need to be paid where the demand was right, while wrongful demand would go into litigation.

Speaking at inauguration of CII national conference and annual session the finance minister said “we are targeting tax stability but India should not be treated as a tax haven."  Jaitley promised to appoint a group to oversee working of new companies act to find out where the shoe pinches. He also said the government will move GST (goods and services tax) Constitutional Amendment Bill in Lok Sabha in next few weeks.

Nearly, 100 overseas funds have been slapped with tax notices estimated at $5-6 billion for 'untaxed gains' made by them in the Indian markets over the past years. They have now approached the government citing fresh concerns over the Indian tax regime. These foreign institutional investors (FIIs) got notices from the tax department for a controversial minimum alternate tax (MAT) of 20 per cent, while they are now being followed up with assessment orders.

Top officials said that the Authority for Advance Rulings had ruled in tax department's favour, which allows it to levy MAT on capital gains. "Every action against foreign players should not be blown out of proportion. Other countries have similar laws, India alone doesn't have such laws," a senior official has said. The notices are in line with the norms prior to the introduction of the Finance Bill 2015.

The FIIs have, however, decided to challenge the tax demands, stating that MAT cannot be levied on FIIs or foreign portfolio investors (FPIs) as they do not earn any 'business income' in India and their income is defined as ‘capital gains’ under the I-T Act. The government has proposed to amend the law. However, the amendments will take effect from April, 1, 2016.

Officials defended the notices saying that they have been issued under the current legal regime.