Changes in tax treaties will reduce round-tripping and make FDI numbers less impressive than they are now.
India recently amended its tax treaty with Singapore – the third such amendment this year after introducing changes to the treaties with Mauritius and Cyprus – to plug a loophole that was being used to funnel unaccounted money into the country in the form of foreign direct investments (FDI).
While the government has hailed the move as another milestone in the fight against black money, it could impact the quantum of FDI flowing into India in the short term. A major chunk of investments routed through these destinations were often not genuine FDI, but round-tripping of funds. Therefore, going ahead, FDI data may not look as impressive as it is now. However, future data would reflect genuine investments.
The amended treaties seek to tax any capital gains from sale of shares of any listed or unlisted company based in India from April 1. At present, such share sales were not taxed in India and, since capital gains tax was zero in the resident country such as Mauritius and Singapore, these transactions would not be taxed in both the source (India) and the resident country (Mauritius or Singapore).
According to experts, a lot of money that was coming into India in the form of FDI was actually unaccounted money generated in India that was sent to other countries by dubious means, and was being routed back to India through no-tax regimes like Singapore, Mauritius and Cyprus. This, experts say, inflated the overall FDI figure.
This story is from the January 29, 2017 edition of Business Today.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the January 29, 2017 edition of Business Today.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
Picking Up The Paytm Pieces
Paytm Founder Vijay Shekhar Sharma Is Back In The Trenches After Rbi's Recent Action Left Him Without A Banking Platform. There Are Still Some Opportunities, But He Will Have To Move Swiftly To Grab Them
PMS Vs MF The Big Fight
How do mutual funds and portfolio management services match up? Know the score on structure, rules, entry fees, charges, and tax perks to pick the right path for your financial journey
Four Levers Of Enterprise AI Strategy
Wide-scale private sector AI deployment and new AI-based business opportunities and ecosystems can truly supercharge the Indian economy
"Don't let a unique chance slip by"
JEFF MAGGIONCALDA | CHIEF EXECUTIVE OFFICER | COURSERA
THE INCOMING DISRUPTION
The disruption in the industrial sector is still unknown, but inevitable. Companies need to wake up
THE WHEEL WHISPERER
For Manan Shah, Managing Director of MICL Group, luxury cars are not about showcasing one's wealth or status. It is about personal well-being
TRIPPING WITH TECH
A road trip is an adventure like no other. While you take in the experience, get some peace of mind with these nifty gadgets
Transforming Spaces
WHETHER YOU WANT TO REDECORATE YOUR BEDROOM OR HALLWAY, A GORGEOUS WALLPAPER ADDS FLAIR TO YOUR HOME AND ALLOWS YOU TO STAMP YOUR STYLE IN YOUR NEW ABODE
ALPHATALE
MONEY MANAGERS TO THE AFFLUENT DELIVERED ROBUST RETURNS TO INVESTORS IN THE PAST YEAR, THANKS TO THE BUOYANCY IN THE MARKETS. BUSINESS TODAY DECODES THEIR STRATEGY
"THE ALTERNATIVES SPACE CAN GROW 3X IN FIVE YEARS"
Vikaas M. Sachdeva, MD of Sundaram Alternates, talks about where India's alternative investment industry is headed