MUMBAI: While the United States is the top source of foreign portfolio investment (FPI), Mauritius is still the most preferred route when it comes to FDI in India due to the favourable tax treatment given to foreign investors.
The US is only the fifth largest FDI source for India, way below other major jurisdictions like Singapore, UK, Japan and Netherlands. According to the latest data available with the DIPP, the total FDI investment in FY15, which came through Mauritius stood at Rs 55,172 crore. The total investment from Mauritius stood at Rs 4.25 lakh crore and accounts for 35 per cent of the total FDI in India till date. “In case of FPIs, which primarily invest in listed equity shares, the domestic law itself exempt investors from paying long-term capital gain tax on returns generated through the sale of shares in listed firms. So, to an extent it doesn’t depend whether an investor comes from Mauritius or from the US,” said Siddharth Shah, partner at law firm Khaitan & Co.
“However, investors coming from jurisdictions with which India does not have a double taxation avoidance agreement or those where DTAA doesn’t offer any tax benefit, have to pay a long term capital gains tax of 20 per cent. That is the reason why a majority of FDI into India is through Mauritius,” added Mr Shah.
