India-Mauritius to review double taxation treaty in February

The joint working group on India-Mauritius double taxation avoidance convention (DTAC) is meeting in February in New Delhi to review the tax treaty between the two nations, commerce and industry minister Anand Sharma said in a statement today.

The group was constituted in 2006 to put in place adequate safeguards to prevent misuse of DTAC. It has had eight rounds of meeting since then but a mutually acceptable solution is still awaited. According to Indian tax officials, the tax treaty is being used for round tripping, concealing their income from the tax authorities and avoiding tax .

Sharma is on a two-day visit to Mauritius where he met the country's Prime Minister Navinchandra Ramgoolam today and raised the need for deepening and diversifying trade and investment ties between the two countries.

Around 40 per cent of total FDI inflows in India comes from Mauritius. Given the nature of the treaty, an investor routing investment through Mauritius does not have to pay capital gains tax in India while the gains are fully exempt from taxation in Mauritius under its domestic laws. This is being abused by investors, according to the income tax department.

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