New Delhi: The government Tuesday said it is reviewing the double taxation avoidance agreement (DTAA) with Mauritius to prevent tax evasion and strengthen exchange of information on the matter between the two countries.
"Government has proposed to review the India-Mauritius DTAC to incorporate appropriate changes in the DTAC for prevention of treaty shopping and to strengthen the mechanism for exchange of information on tax matters between India and Mauritius," Minister of State for Finance S S Palanimanickam said in a written reply to the Rajya Sabha.
He said Mauritius based companies are subjected to minimal or nil taxes in that country as capital gains is fully exempt from taxation there.
"India-Mauritius Double Taxation Avoidance Convention (DTAC) provides for taxation of capital gains arising from alienation of shares only in the country of residence of the investor," Palanimanickam added.
Thus, an investor routing his investments through Mauritius into India does not pay capital gains tax either in India or in Mauritius.
Mauritius has become an attractive route for investment into India more as treaty shopping, through which the resident of a third country takes advantage of the provision of the DTAA between the two countries to reduce tax liability.
India signed a Convention in 1982 with Mauritius for the avoidance of double taxation and prevention of tax evasion and to encourage mutual trade and investment.
First Published: Tuesday, August 03, 2010, 17:31