Markets Tank on Fears of Revision of India-Mauritus DTAA

Alchemist · #1 20th June 2011, 10:19 AM

There are rumors (may actually be true) that India-Mauritus DTAA (Double Taxation Avoidance Agreement) may be reworked.

To make things short:

As per current agreement, Mauritius-based FIIs don't have to pay capital gains tax in India, but in Mauritius.

The tax rates are very low in Mauritius and thus FIIs invest in India via Mauritius to avoid capital gains tax.

According to market rumors, DTAA may be revised and Mauritius-based FIIs will have to pay capital gains tax in India.

ramkasi · #2 20th June 2011, 10:52 AM

Just back and saw the rumor report on moneycontrol, it gave good dip in intra day to buy good quality stocks which have nothing to do with this rumor.

I was tracking Time Technoplast to buy close to 60 levels, it did came to 61.10 level and recovered to 64.80 quickly

, I missed.

sudhashbahu · #3 20th June 2011, 12:03 PM

Quote:

Originally Posted by Alchemist

There are rumors (may actually be true) that India-Mauritus DTAA (Double Taxation Avoidance Agreement) may be reworked.

To make things short:

As per current agreement, Mauritius-based FIIs don't have to pay capital gains tax in India, but in Mauritius.

The tax rates are very low in Mauritius and thus FIIs invest in India via Mauritius to avoid capital gains tax.

According to market rumors, DTAA may be revised and Mauritius-based FIIs will have to pay capital gains tax in India.

What would the long-term impact of this be?

Alchemist · #4 20th June 2011, 02:18 PM

Quote:

Originally Posted by sudhashbahu

What would the long-term impact of this be?

Next to nothing.

Even if the DTAA is going to be revised, it won't happen before FY 2013.

Taxes are based on profits. FIIs will continue to invest in India if they feel they can make profits in India.