New Delhi: India is renegotiating over a two-decade old tax treaty with Singapore and the revised protocol will take into account the concerns of both.
"Negotiations are under way with Singapore... It is a bilateral treaty. We have to take concerns of both the countries and then we will have to sign," Central Board of Direct Taxes (CBDT) Chairperson Rani Singh Nair told reporters.
India is keen to rework the treaty because it wants to extend to Singapore the capital gains tax provisions of a revised tax pact with Mauritius.
"They are under the same protocol as Mauritius. So, now that we have renegotiated Mauritius, Singapore is under discussion," Nair said even as she did not divulge a timeline for conclusion of the revision.
India and Singapore had entered a Double Taxation Avoidance Agreement (DTAA) on May 27, 1994. The bilateral tax treaty helps in avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.
India on May 10 amended the 34-year-old tax treaty with Mauritius. After toiling for almost a decade to redraw the contours, India will start imposing capital gains tax on investments in shares through Mauritius from April next onwards.
Following the revised agreement, short-term capital gains tax will be levied at half the rate prevailing during the first two-year transition from April 1, 2017 to March 31, 2019. The gains are taxed at 15 percent at present. The full rate will kick in from April 1, 2019.
The redrawn Mauritius treaty has prompted the government to go for a similar amendment in India's tax treaty with Singapore.
Mauritius and Singapore accounted for USD 17 billion of the total USD 29.4 billion India received in FDI during April-December 2015.