India will not issue any new demands for payments under a policy aimed at ensuring companies pay a minimum amount of tax, following an outcry from foreign businesses and investors.
The Central Board of Direct Taxation, part of India's Tax Department, also said on Monday it would take no coercive action to pursue claims that have already been filed under the so-called minimum alternate tax (MAT).
The decision comes after the imposition of retrospective MAT tax claims totalling 6.02 billion rupees.
While initially aimed at domestic companies, India has also been imposing MAT on foreign institutional investors (FII), including Aberdeen Asset Management, since late last year.
Aberdeen has challenged its MAT claim at the High Court of Bombay. Other companies, including BNP Paribas have also filed challenges, according to court documents.
The government said last week it would set up a panel to suggest ways to resolve MAT disputes, as well as some other tax issues.
"This is indeed a very positive development," said Rajesh H Gandhi, a partner at Deloitte Hakins & Sells in an emailed comment.
"A lot of FIIs who have not received notices so far have been quite concerned and anxious to know if and when they will receive a notice and how they should approach the matter given the uncertainty on the MAT issue."