In order to extend the capital gains tax provisions of the recently-concluded tax pact with Mauritius, India needs to hold talks with Singapore on the renegotiation of the tax treaty. Finance Minister Arun Jaitley said, “It is a separate sovereign state, Mauritius treaty does not ipso facto automatically extend. The principles will have to be applied, but applied through a process of renegotiation.”
It started in august 1982, when India signed the treaty with Mauritius to remove double taxation of income and capital gains in order to gear up investment and trade between the countries.
While speaking at the Indian Women Press Corps event, Mr. Jaitley added, “But sooner or later, that process will commence and hopefully conclude.”
Jaitley states that,”I am not giving it a timeline, because if you recollect, the renegotiation process of the Mauritius treaty started first in 1996 and it continued till about 2002 and then there was a pause. Singapore was entered into in 2005 and one of the covenants of Singapore was that provisions of what happens in Mauritius treaty would extend to it.”
Notedly, India amended the 34-year-old tax treaty with Mauritius on May 10. This has been done in order to shape a new treaty between the two nations. From now onwards, India will impose capital gains tax on investments that are carried out in partnership with Mauritius. It is said that the new Mauritius treaty will accelerate the similar amendment for the tax treaty with Singapore. So, it’s important to hold talks with Singapore on this treaty.
According to some reports, During April-December 2015, India received a total of USD 29.4 billion in FDI, which mentioned Mauritius and Singapore for USD 17 billion of the total FDI received by India. The revised agreement will be applicable at the half rate during the first two years of transaction, starting from April 1, 2017 to March 31, 2019. The Short-term capital gains are liable for a tax of 15 per cent. The full rate will be applicable from April, 2019.
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