India’s government has set itself on a collision course with global fund managers, after finance minister Arun Jaitley revealed that tax demands on foreign investors are intended to raise as much as Rs400bn ($6.4bn).

Speaking on Indian television, Mr Jaitley for the first time revealed the size of potential bills for the minimum alternative tax, a form of corporate taxation that has traditionally not been applied to international funds.

Mr Jaitley’s remarks prompted dismay among senior figures at international investment funds and banks in India. “There is a lot more concern now; this thing could be incredibly messy,” said the Mumbai-based head of one global financial institution, who spoke on condition of anonymity. “Investors think this could come with a very serious dent on the markets.”