India amends tax treaty with Singapore, plugs another gap to curb black money
India today amended its tax treaty with Singapore to plug gaps which allow avoidance of tax and routing of black money. First signed in 2005, the amendment will kick-in from April 2017, when capital gains tax will be implemented on investments in India’s capital markets that come from Singapore. For the first two years beginning 2017, the tax will be 50% of the prevailing domestic rate, and the full rate will apply from April 2019.
This amendment follows the changes that India made in its treaties with Mauritius and Cyprus, earlier this year.
For long Mauritius and Singapore have been the favoured destinations for foreign investors to route their money into India, for the capital gains tax benefits that both these countries offered under the treaties with India.
Of the total FDI inflows of USD 29.4 billion in April- December 2015-16, Mauritius and Singapore accounted for USD 17 billion.
“This year on May 10 we had amended DTAA with Mauritius. Then in September we amended with Cyprus and today we amended the DTAA with Singapore,” said finance minister Arun Jaitley. He added: “We have successfully stopped round tripping through this route.”
The amendment of treaties with Mauritius, Cyprus and Singapore has been complimented by the Indian government’s success in persuading Switzerland to share information on Indians banking with Swiss banks. This information exchange will begin from 2019.
“2016 has been significant and historic as we amended these treaties,” Jaitley said.
Most experts welcomed the move. “The final outcome as regards the Singapore Treaty is not a surprise and most investors were expecting that it would mirror the new Mauritius Treaty,” said Abhishek Goenka, partner, direct tax in PwC India.