Finance Minister Arun Jaitley on Monday said that legitimate tax demands cannot be misinterpreted as tax terrorism.
Speaking at an industry body event, Mr Jaitley stressed that India was not a tax haven and legitimate tax demands must be paid by foreign investors.
"The converse of tax terrorism is not tax haven. Taxes which are not payable must not be paid but taxes which are payable must be paid," Mr Jaitley said.
Mr Jaitley's statement comes on the back of taxmen sending out notices to foreign institutional investors or FIIs to shell out tax on their gains made in the past few years. According to estimates, FIIs could face a tax bill of nearly $6 billion or Rs 37,500 crore ($1=Rs 62.5).
"India is not so vulnerable that every legitimate tax demand is considered as tax terrorism ... we are not a tax haven and we don't intend to be one," Mr Jaitley said.
The Income Tax department has imposed 20 per cent minimum alternate tax or MAT on capital gains made by foreign institutional investors or FIIs.
Mr Jaitley in his budget speech in February proposed to scrap MAT on capital gains made by FIIs.
Commenting on the tax notices, Revenue Secretary Shaktikanta Das said, "I think what FIIs and FPIs (foreign portfolio investors) are asking is retrospective exemption and not retrospective application of a tax law. Because MAT was leviable on them, therefore these assessment, these demand have been raised,"
MAT exemption on foreign investors is applicable from April 1, 2016, Mr Das clarified.
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