India gives relief from tax that worried foreign investors

NEW DELHI (Reuters) - India has waived retrospective imposition of a controversial minimum alternative tax (MAT) affecting foreign funds, the Finance Minister said on Tuesday, in a move that could resolve a dispute that had shaken investor confidence.

Finance Minister Arun Jaitley said the government had accepted the recommendations of a panel set up to examine the issue, and said he would make the change permanent through legislation in the next parliament session.

Jaitley told a news conference that pending the change in the income tax law, a notice would be circulated to tax officers ordering them not to issue any more claims under the levy known as MAT.

"Confidence among investors could be a consequence of this," Jaitley said.

On Sept. 29 the country's top court is due to hear a legal challenge filed by Mauritius-based Castleton Investment Ltd against the government over a number of tax-related issues, including on whether MAT can be imposed on foreign investors.

It was not immediately clear if the hearing will still go ahead, given that the government's move would seem to take the wind out of the sails of the investors' main complaint.

(Reporting by Aditya Kalra)