NEW DELHI: India plans to close a tax loophole that allows its citizens to channel income through the tropical island of Mauritius and avoid paying taxes, officials said.
From April 1 next year, India will begin imposing a capital gains tax on investments routed through Mauritius, in line with global efforts to curb financial malpractices.
For decades, wealthy Indians have exploited a loophole in the countries’ 1993 tax treaty designed to prevent double taxation. Instead, many stash their earnings tax-free in Mauritius and then bring the money back to India. The practice, known as “round-tripping,” has made Mauritius India’s largest official source of foreign direct investment.
Between 2000 and 2015, Mauritius accounted for around $94 billion, or nearly 34 percent, of foreign direct investment in India.
Finance Ministry official Shaktikanta Das said the changes would curb tax evasion and streamline investment flows in line with India’s pledge to boost revenues and crack down on corruption.
From April 1 next year, India will begin imposing a capital gains tax on investments routed through Mauritius, in line with global efforts to curb financial malpractices.
For decades, wealthy Indians have exploited a loophole in the countries’ 1993 tax treaty designed to prevent double taxation. Instead, many stash their earnings tax-free in Mauritius and then bring the money back to India. The practice, known as “round-tripping,” has made Mauritius India’s largest official source of foreign direct investment.
Between 2000 and 2015, Mauritius accounted for around $94 billion, or nearly 34 percent, of foreign direct investment in India.
Finance Ministry official Shaktikanta Das said the changes would curb tax evasion and streamline investment flows in line with India’s pledge to boost revenues and crack down on corruption.
