Politics
Indian government has successfully made changes to the 33-year-old India-Mauritius tax treaty so that loss of revenue and round-tripping can be prevented. After this, the government is looking forward to starting similar talks with Singapore so that the double taxation avoidance agreement (DTAA) can be changed to avoid leakages.
Singapore, the second-biggest source for foreign direct investments (FDI) into India after Mauritius, accounts for over 16% of cumulative inflows in the country.
"We will start negotiations with them soon," a senior government official told ET. By tweaking the agreement, there is a hope over the confusion over the bilateral tax treaty between India and Singapore to end.
The capital gains tax benefit under this agreement is directly linked to the capital gains tax provision in the India-Mauritius tax treaty; however, there need to be some changes in the India-Singapore treaty so that the changes in the treaty with Mauritius can be clearly spelt out.
The revamped India-Mauritius treaty was announced on Tuesday, stating that capital gains on investments made in India through Mauritius will get fully taxed here, starting from April 1, 2019. These changes can also affect the Singapore treaty, which would lose the benefits it has so far enjoyed.
However, because of an international protocol, New Delhi is keen to provide stability and certainty to investors, with the government eager to renegotiate it, in order to incorporate clear provisions upfront in the Singapore treaty. "There should not be any issue in renegotiating the treaty," said the official cited above.
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