India has resumed talks with Mauritius to revise the existing tax treaty and have a double taxation avoidance agreement that will help track black money, finance minister Pranab Mukherjee said on Tuesday.
"For some time the talks were suspended, now it has resumed," Mukherjee told reporters when asked about the developments on tax treaty with Mauritius that battered stocks on Monday.
The minister tried to downplay the issue saying the two countries had been negotiating the agreement for the last few years but the talks were suspended for some time.
"So far as the Mauritius double taxation avoidance agreement negotiations are concerned, it is an old one,” Mukherjee told reporters on the sidelines of a function.
Indian equities markets slumped on Monday on speculations that the two countries would soon have a new tax treaty that might affect investments by foreign institutions in India. The benchmark Sensex had slumped 2%.
Market analysts fear that foreign institutional investors would offload even more from Indian markets once the treaty becomes operational.
Over the weekend, a senior Central Board of Direct Taxes (CBDT) official was quoted as having said that officials of India and Mauritius are expected to meet soon to work out the details of the new Double Taxation Avoidance Agreement.
India receives over 40% of its foreign direct investment through companies and funds registered in Mauritius.
The tax department is seeking to tax gains made by companies registered in Mauritius and operating in India.