Fresh tax notices to FPIs over capital gains

Fresh tax notices to FPIs over capital gains

The I-T department has asked multiple foreign portfolio investors (FPIs) to cough up more taxes on their capital gains after denying set-off and tax treaty benefits, people aware of the development said. The notices were issued by the Centralised Processing Centre (CPC) of the I-T department under Section 143(1) of the Income-tax Act.

The intimation under Section 143(1) informs taxpayers about initial assessments carried out by the tax department and points out discrepancies in tax filings, and demands additional taxes, if any.

Intimations demanding additional taxes primarily cited three reasons, the sources said. Either the FPIs have been disallowed to set off long-term capital gains against short-term capital losses, or the tax department has not taken tax treaties into consideration, or, in some cases, it has categorised short-term capital losses incurred by FPIs as gains, they claimed.

Many tax experts suspect that this could just be a technical glitch in the system, but even so the FPIs will now have to approach either the Commissioner of Income Tax (Appeals) or litigate the matter.