Mauritius Tax Treaty

After infusing money for two straight months, foreign investors turned net sellers in April with the dumping of Indian equities worth Rs 8,700 crore on concerns over a tweak in India's tax treaty with Mauritius and a sustained rise in US bond yields. This came following a staggering net investment of Rs 35,098 crore in March and Rs 1,539 crore in February, data with the depositories showed. Overall, the total inflow for 2024 so far stood at Rs 2,222 crore in equities and Rs 44,908 crore in debt market. As per the data, Foreign Portfolio Investors (FPIs) made a net outflow of Rs 8,671 crore in Indian equities. Kislay Upadhyay, smallcase manager and founder of Fidelfolio, said this outflow was due to adjustment after heavy inflow in March, a short-term gain prospect in longer duration bond in anticipation of a rate cut and 'wait and watch mode adopted by investors till the announcement of election results. While the tweak in India's tax treaty with Mauritius on investments made in .

The Income Tax Department on Friday said the amended India-Mauritius protocol on double taxation avoidance agreement is yet to be ratified and notified by the department. India and Mauritius on March 7, 2024, signed an amendment to the DTAA and included a principal purpose test (PPT) in the pact which aims to curtail tax avoidance by ensuring that treaty benefits are only granted for transactions with a bona fide purpose. There were concerns that foreign portfolio investments coming via Mauritius would face increased scrutiny by tax authorities. Also, there were apprehensions that past investments could be covered by the amended protocol. In a post on X (formerly Twitter), the I-T department said some concerns have been raised on the India Mauritius DTAA amended recently. "In this context, it is clarified that the concerns /queries are premature at the moment since the Protocol is yet to be ratified and notified u/s 90 of the Income-tax Act, 1961. "As and when the Protocol comes i

Assessee appealed it was denied benefit of treaty on capital gains from share transfer

IVCA had said the move to treat all income from Indian AIFs as dividends would wreak havoc on funds with a presence in Mauritius and investments in India

The move to tax capital gains from India would fundamentally alter the character of all income arising from Indian AIFs and lead to increased litigation

Experts say while the backlog of cases will most likely be reduced, the quality of rulings may not inspire taxpayers

In May, India and Mauritius signed a protocol to introduce in-principle taxation of capital gains in India in a phased manner

A foreign company in India will be taxable if its employees spent 90 days in India in the past 12 months

Deliberate on their concerns over taxation against the backdrop of India signing revised tax treaty with Mauritius this week

The government should clarify as soon as possible so that investors get time to realign their strategy

P-notes will get impacted but no sweat for markets

Fund-raising could become tough after capital gains tax kicks in from April 2017

The treaty between India and Mauritius was inked in 1983, but assumed significance a decade later, when foreign institutional investors were allowed to invest in Indian shares

According to analysts, India will next year toughen the criteria under which offshore funds can claim tax benefits abroad

General anti-avoidance rule applies in case of any situation where there is an abuse of treaty for gaining tax benefit unduly

Analysts say this treaty shouldn't upset the Indian equity markets in the short-to-medium term