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Indian government has successfully made changes to the 33-year-old <a href="http://India singapore DTAA, India Mauritius tax treaty, India Singapore Tax Agreement, Singapore FDI in India">India-Mauritius tax treaty </a>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 <a href="http://www.businessinsider.in/Mauritius-tax-haven-no-more-India-signs-new-deal-to-prevent-abuse-of-tax-avoidance-treaty/articleshow/52207548.cms">Mauritius</a>, 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 <a href="http://www.businessinsider.in/India-will-tax-capital-gains-on-investments-from-Mauritius-starting-in-2017-with-new-agreement/articleshow/52208262.cms">capital gains tax benefit</a> 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. 
 
<a href="http://www.indiawrites.org/wp-content/uploads/singapore-pm.png">Image source</a>

India-Mauritius tax treaty has been amended, and it’s time for the Indian government to make some changes in the Singapore treaty

<keyword id="2829070" type="UNKNOWN" weightage="20" keywordseo="While-PM">While PM</keyword> Modi is inviting global companies to come and invest in India, the epic legal battle brewing between foreign portfolio investors (FPI) and Indian tax authorities is sending wrong signals outside the country—and is thus, putting India’s reputation as a foreign-investment-friendly nation at stake. 
 As per a news report by The Economic Times, five FPIs have teamed up to challenge the applicability of minimum alternate tax (MAT) to capital gains arising from trading in stocks and bonds. The FPIs plan to file a writ petition in the <keyword id="48485" type="ORGANIZATION" weightage="20" keywordseo="Bombay-high-court">Bombay High Court</keyword> on Thursday challenging the tax demand. 
 
ET could not ascertain the names of the five FPIs and the quantum of MAT demand. However, demands ranging from Rs 1 crore to Rs 50 crore have been raised by taxmen in draft assessment orders to FPIs at the end of last month. 
 <keyword id="231315" type="POSITION" weightage="20" keywordseo="Junior-finance-minister">Junior Finance Minister</keyword> <keyword id="6357677" type="PERSON" weightage="20" keywordseo="Jayant-Sinha">Jayant Sinha</keyword> has confirmed on written that 68 notices had been sent to FPIs for payment of Rs 602.83 crore towards MAT. 
 Earlier, in a statement that had caused considerable consternation, the <keyword id="6355261" type="POSITION" weightage="20" keywordseo="Finance-minister">finance minister</keyword> had said the government could potentially collect around Rs 40,000 crore from FPIs. 
 
The news report by the financial daily reads, the dispute, which has damaged India's international reputation, flared up when the I-T department started sending notices to FPIs about six months ago asking them to pay MAT for the financial year 2011-12. Many tax experts, ET spoke to said MAT cannot be applied to an entity that doesn't have a so-called permanent establishment in the country. 
 
By March 31, assessing officers had sent draft assessment orders to FPIs asking them to pay MAT. Subsequently, demands were raised for two more years — FY10 and FY11 — in the first week of April. Indian income-tax laws allow assessing officers to go back seven years in the hunt for previous taxes. 
 During a conference call last Wednesday, <keyword id="120753" type="POSITION" weightage="20" keywordseo="revenue-secretary">Revenue Secretary</keyword> <keyword id="6359111" type="PERSON" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword>, Central Board of Direct Taxes (CBDT) Chairperson Anita Kapur and <keyword id="141786" type="POSITION" weightage="20" keywordseo="Minister-of-State-for-Finance">Minister of State for Finance</keyword> Jayant Sinha told investors that MAT would not be levied on funds that have invested through countries such as <keyword id="6356662" type="COUNTRY" weightage="20" keywordseo="Singapore">Singapore</keyword> and Mauritius, with whom India has double-taxation avoidance agreements (DTAAs). 
 
A day later, CBDT issued a circular instructing tax officers that decisions should be taken in "...all cases of foreign institutional investors seeking treaty benefits under the provisions of respective DTAAs, decisions may be taken on such claims within one month from the date such claim is filed". Many tax experts have dubbed this order vague since it doesn't mention the word MAT or tell tax officers what action should be taken in this regard. 
 
(Image: Reuters)

India’s reputation as foreign investment friendly nation at stake. Know why

The <keyword id="6354751" type="COMPANY" weightage="80" keywordseo="Income-Tax">Income Tax</keyword> department has sent notices in 68 cases to Foreign Institutional Investors (FIIs) for payment of dues totalling Rs 608.83 crore towards Minimum Alternate Tax (MAT), Parliament was informed today. 
 
 "The applicability of MAT provisions is a legal issue and wherever the cases require application of MAT provisions, the same is being done," Minister of State for <keyword id="25455" type="ORGANIZATION" weightage="80" keywordseo="finance">Finance</keyword> Jayant Sinha said in a written reply to Lok Sabha. 
 
 
When asked if the tax department has slapped notices to 100 overseas funds for evasion of tax to the tune of USD 5-6 billion, Sinha said notices were issued only in 68 cases, envisaging total tax demand of Rs 602.83 crore. 
 
 
"Tax notices have been issued in 68 cases of overseas funds to bring to tax the book profits as per MAT provisions under section 115JB of the Income Tax Act, 1961. So far, total tax demand of Rs 602.83 crore has been raised," the Minister said. 
 
Following a court ruling, the Income Tax department had slapped notices on foreign portfolio investors (FPIs), saying they have to pay 20 per cent MAT on untaxed capital gains made by them over the past three years. 
 
 As the issue has generated a lot of controversy, <keyword id="6355261" type="POSITION" weightage="80" keywordseo="Finance-minister">Finance Minister</keyword> <keyword id="42575" type="PERSON" weightage="80" keywordseo="Arun-Jaitley">Arun Jaitley</keyword> is expected to come out with some clarification at the time of his reply to the debate on the <keyword id="123776" type="ORGANIZATION" weightage="80" keywordseo="Finance-Bill">Finance Bill</keyword> in the House. 
 
According to experts, foreign investors paying capital gains tax in their home nations will not be subject to the 20 per cent minimum alternate tax (MAT) in India. 
 
 Besides, investors coming from nations with which India has a double <keyword id="6383566" type="PERSON" weightage="80" keywordseo="Taxation">taxation</keyword> avoidance agreement (DTAA) such as <keyword id="56022" type="COUNTRY" weightage="80" keywordseo="Mauritius">Mauritius</keyword> and <keyword id="6356662" type="COUNTRY" weightage="80" keywordseo="Singapore">Singapore</keyword> may be exempt as there is no tax on capital gains there.

Know why Foreign Investors will be very angry with
Modi and his government right about now

India and Australia on Thursday inked a landmark agreement for reciprocal access to military bases for logistics support besides firming up six more pacts to further broadbase ties after Prime Minister <keyword id="6354477" type="PERSON" weightage="20" keywordseo="Narendra-Modi">Narendra Modi</keyword> and his Australian counterpart <keyword id="826044" type="PERSON" weightage="20" keywordseo="Scott-Morrison">Scott Morrison</keyword> held an online summit. The Mutual Logistics Support Agreement (MLSA) will allow militaries of the two countries to use each other's bases for repair and replenishment of supplies besides facilitating scaling up of overall defence cooperation. India has already signed similar agreements with the US, France and Singapore. The other pacts will provide for bilateral cooperation in areas of cyber and cyber-enabled critical technology, mining and minerals, military technology, vocational education and water resources management. In the talks, the two sides also deliberated on a host of key issues including dealing with growing threat of terrorism, maritime security challenges in the Indo-Pacific region, reform in the World Trade Organisation and ways to deal with the coronavirus crisis. According to a joint statement issued after the Modi-Morrison talks, both sides discussed the issue of taxation of offshore income of Indian firms through the use of the India-Australia Double Taxation Avoidance Agreement (DTAA) and sought early resolution of the issue. It said both sides also decided to re-engage on a bilateral Comprehensive Economic Cooperation Agreement (CECA) while suitably considering earlier bilateral discussions where a mutually agreed way forward can be found. The two countries recognised that terrorism remains a threat to peace and stability in the region and strongly condemned the menace in all its forms and manifestations, stressing that there can be no justification for acts of terror on any grounds whatsoever. The joint statement said both sides support a comprehensive approach in combating terrorism, including by countering violent extremism, preventing radicalisation, disrupting financial support to terrorists and facilitating prosecution of those involved in acts of terror. The two sides also called for early adoption of a Comprehensive Convention on International Terrorism (CCIT). In his opening remarks, Modi also pitched for a coordinated and collaborative approach to come out of the adverse economic and social impact of the epidemic that has infected around 65 lakh people and killed 3.88 lakh globally. He said a process of comprehensive reforms covering almost all areas has been initiated in India as his government viewed the coronavirus crisis as an "opportunity". Referring to the virtual summit, the prime minister termed it "a new model of India-Australia partnership, a new model of conducting business". It was the first time that Modi held a "bilateral" virtual summit with a foreign leader. The prime minister described his talks with Morrison as "an outstanding discussion", covering the entire expanse of ties between the two strategic partners. "Our government has decided to view this crisis as an opportunity. In India, a process of comprehensive reforms has been initiated in almost all areas. It will soon see results at the ground level," the prime minister said. Modi also conveyed his appreciation to Morrison for taking care of the Indian community in Australia, especially the students during the "difficult time". In his remarks, Morrison complemented Modi for his "constructive and very positive" role including at the G-20 role in pushing for a concerted global approach in dealing with the coronavirus crisis. Modi said he believed that it is the "perfect time and perfect opportunity" to further strengthen the relationship between India and Australia. "We have immense possibilities to make our friendship stronger," Modi said, adding: "How our relations become a 'factor of stability' for our region and for the world, how we work together for global good, all these aspects need to be considered." The prime minister said India was committed to expand its relations with Australia on a wider and faster pace, noting that it is important not only for the two countries, but also for the Indo-Pacific region and the world. "The role of our comprehensive strategic partnership will be more important in this period of global epidemic. The world needs a coordinated and collaborative approach to get out of the economic and social side effects of this epidemic," he said. SEE ALSO: <a href="https://www.businessinsider.in/defense/news/china-responds-to-prime-minister-narendra-modi-and-us-president-donald-trump-conversation/articleshow/76188158.cms">China responds to Modi-Trump conversation — ‘there is no need for any third party to intervene’</a> <a href="https://www.businessinsider.in/defense/news/india-china-border-standoff-reaches-lieutenant-general-level-military-negotiation/articleshow/76167405.cms">India-China border standoff reaches Lieutenant-General level military negotiation</a> <a href="https://www.businessinsider.in/defense/news/china-is-a-bully-says-us-representative-on-india-china-border-issue/articleshow/76147159.cms">China is a ‘bully’ says US Representative on India-China border issue</a>

India and Australia ink landmark defence pact after Modi-Morrison online summit

<ul><li>The Authority of Advance Rulings (AAR) has just rejected <keyword id="526777" type="COMPANY" weightage="20" keywordseo="Tiger-Global">Tiger Global</keyword>’s application to avail zero withholding tax on the deal. </li><li>The AAR has ruled that the company set up a Mauritius entity only for the benefits of the deal and that the ‘head and brain’ of the company was still based out of the US. </li><li>Tiger Global, one of the earliest backers of <keyword id="6354742" type="COMPANY" weightage="20" keywordseo="Flipkart">Flipkart</keyword> and held a 22% stake, had sold 17% stake in the company for ₹14,500 crore. </li></ul>In May 2018, <keyword id="80487" type="COMPANY" weightage="20" keywordseo="walmart">Walmart</keyword> bought Flipkart for a whopping $16 billion. Two years later, the tax on the deal is still an issue. The Authority of Advance Rulings (AAR) has just rejected Tiger Global’s application to avail zero withholding tax on the deal. However,<a href="https://www.cnbctv18.com/startup/flipkart-stake-sale-tax-body-finds-tiger-global-guilty-of-tax-avoidance-rejects-plea-for-exemption-6058341.htm"> Tiger Global </a>which used its Mauritius entity to avoid tax through the India-Mauritius Double Tax Avoidance Agreement (DTAA), is now in trouble. The AAR has ruled that the company set up a Mauritius entity only for the benefits of the deal and that the ‘head and brain’ of the company was still based out of the US. While the AAR report does not mention Tiger Global, it does specify ₹14,500 crore exit. Tiger Global, one of the earliest backers of Flipkart and held a 22% stake, had sold 17% stake in the company for ₹14,500 crore. According to <a href="https://timesofindia.indiatimes.com/business/india-business/vcs-flipkart-exit-faces-tax-hurdle/articleshow/76163882.cms">ET,</a> while most of its shares were from its Mauritius entity, it also held stake from its Singapore-based entity. Meanwhile, the first backer of Flipkart – Accel too had invested in the company through its Mauritius subsidiary. Flipkart’s investors who had taken an exit from the company during the Walmart deal were asking for lower tax deduction certificates. It enables non-residents to ensure that tax is deducted not on the sale price but on their taxable capital gains arising from such sale. Essentially, the tax on the seller will be lower. The PE firm can now approach the high court and appeal against the AAR's judgement, or the I-T Appellate Tribunal, said the report. SEE ALSO: <a href="https://www.businessinsider.in/tech/apps/news/remove-china-apps-removed-from-google-play-store-after-5-million-downloads/articleshow/76169569.cms">‘Remove China Apps’ pulled from Google Play store after 5 million downloads</a> <a href="https://www.businessinsider.in/india/news/cyclone-nisarga-is-all-set-to-cross-maharashtra-and-gujarat-at-a-speed-of-110-kmph-mumbai-on-red-alert/slidelist/76168338.cms">Cyclone Nisarga is all set to cross Maharashtra and Gujarat at a speed of 110 kmph — Mumbai on ‘red’ alert</a> <a href="https://www.businessinsider.in/education/news/iit-bombay-kharagpur-roorkee-and-kanpur-students-will-not-have-to-sit-for-final-year-exams/articleshow/76167610.cms">IIT Bombay, Kharagpur, Roorkee and Kanpur students will not have to sit for final year exams</a>

Tiger Global now has to pay tax on profit from sale of Flipkart stake to Walmart in 2018

Foreign direct investment (<keyword id="44528" type="ORGANIZATION" weightage="20" keywordseo="FDI">FDI</keyword>) into the country increased by 40 per cent to USD 29.44 billion during April-December in the current fiscal. 

	The foreign investment inflows were at USD 21.04 billion in the same period of previous fiscal. 
 

	Among the sectors, computer hardware and software segment attracted the highest FDI of USD 5.30 billion during the period under review, followed by services sector (USD 4.25 billion) and trading business (USD 2.71 billion). 
 Automobile industry attracted FDI of USD 1.78 billion, while chemicals sector cornered USD 1.19 billion <keyword id="3263928" type="UNKNOWN" weightage="20" keywordseo="foreign-equity-investment">foreign equity investment</keyword> in April-December 2015, the DIPP data showed. 

	Also, Singapore toppled Mauritius as the top FDI source for India during the period. 
 

	India received USD 10.98 billion overseas inflows from Singapore, followed by Mauritius (USD 6.10 billion), the US (USD 3.51 billion), the Netherlands (USD 2.14 billion), and Japan (USD 1.08 billion). 
 

	In the calendar year 2015, FDI in India grew by 37 per cent to USD 39.32 billion as against USD 28.78 billion in the previous year, according to the data of Department of Industrial Policy and Promotion (DIPP). 
 

	The government has taken several steps to promote investments through a liberal FDI policy. 
 The <keyword id="3261337" type="UNKNOWN" weightage="20" keywordseo="economic-survey-2015-16">Economic Survey 2015-16</keyword> has said that a favourable policy regime and sound business environment have facilitated increase in FDI flows into the country. 

	It has also raised questions over large FDI inflows from smaller countries including Singapore and Mauritius and wanted the government to find out whether the investments are being routed from these countries only to take advantage of tax avoidance agreements (DTAA). 
 "These inflows need perhaps to be examined more closely to determine whether they constitute actual investment or are diversions from other sources to avail of tax benefits under the <keyword id="684994" type="UNKNOWN" weightage="20" keywordseo="Double-Tax-Avoidance-Agreement">Double Tax Avoidance Agreement</keyword> (DTAA) that these countries have with India," it has said.

FDI up 40% to $29.44 billion in Apr-Dec FY16

The Income Tax department has sent notices in 68 cases to Foreign Institutional Investors (FIIs) for payment of dues totalling Rs 608.83 crore towards Minimum Alternate Tax (MAT), Parliament was informed today. 
 
 
"The applicability of MAT provisions is a legal issue and wherever the cases require application of MAT provisions, the same is being done," Minister of State for Finance Jayant Sinha said in a written reply to Lok Sabha. 
 
 
When asked if the tax department has slapped notices to 100 overseas funds for evasion of tax to the tune of USD 5-6 billion, Sinha said notices were issued only in 68 cases, envisaging total tax demand of Rs 602.83 crore. 
 
 
"Tax notices have been issued in 68 cases of overseas funds to bring to tax the book profits as per MAT provisions under section 115JB of the Income Tax Act, 1961. So far, total tax demand of Rs 602.83 crore has been raised," the Minister said. 
 
Following a court ruling, the Income Tax department had slapped notices on foreign portfolio investors (FPIs), saying they have to pay 20 per cent MAT on untaxed capital gains made by them over the past three years. 
 
 
As the issue has generated a lot of controversy, Finance Minister Arun Jaitley is expected to come out with some clarification at the time of his reply to the debate on the Finance Bill in the House. 
 
According to experts, foreign investors paying capital gains tax in their home nations will not be subject to the 20 per cent minimum alternate tax (MAT) in India. 
 
 
Besides, investors coming from nations with which India has a double taxation avoidance agreement (DTAA) such as Mauritius and Singapore may be exempt as there is no tax on capital gains there.

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India-Mauritius tax treaty has been amended, and it’s time for the Indian government to make some changes in the Singapore treaty

BI India Bureau

India’s reputation as foreign investment friendly nation at stake. Know why

BI India Bureau

Know why Foreign Investors will be very angry with Modi and his government right about now

India and Australia ink landmark defence pact after Modi-Morrison online summit

PTI

Tiger Global now has to pay tax on profit from sale of Flipkart stake to Walmart in 2018

Sanchita Dash

FDI up 40% to $29.44 billion in Apr-Dec FY16

BI India Bureau

Know why Foreign Investors will be very angry with Modi and his government right about now

BI India Bureau

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