New Delhi: The Indian government's proposal to amend tax laws with retrospective effect from 1962 to bring under the tax net all cross-border mergers and acquisition deals involving Indian assets or businesses will not hurt foreign inflows in the country, the Minister of State for Finance S S Palanimanickam said.
"These (Income Tax Act) amendments will not have any impact on foreign investment flow in the country," Palanimanickam said in a written reply to Lok Sabha, the lower house of Parliament Friday.
Further, the proposed changes in the Income Tax Act are just clarification in nature and "will not override the provisions of Double Taxation Avoidance Agreements with 82 countries, which are relevant for taxation of non-residents in the case of offshore mergers and acquisitions", he said.
Several organizations and investors from India and abroad have opposed the government's move to insert the clarifying clause in tax rules, saying that the move is "unfair" and will hurt foreign direct investments in the country.
The change in rules will bring back the UK-based telecommunication giant Vodafone under the tax net over its $11-billion purchase of Hutchison group's Indian operations in 2007.
Indian markets have remained volatile since the government's announcement, in the Union Budget 2012-13, to amend the tax laws with retrospective effect.
The Parliament is expected to consider the Finance Bill 2012, including the proposed amendment in the Income Tax Act, on May 7.