India, Singapore rework tax treaty to curb evasion

The amendment, which is in line with the revised pacts with Mauritius and Cyprus, would allow

India to levy capital gains tax on investments coming from Singapore from April 1, 2017.

'Grandfather' clause

It provides for source based taxation of capital gains arising on transfer of shares in a company. All investments before this will be grandfathered for a period of two years that is till March 31, 2019.During the two-year transition period between 2017 to 2019, capital gains tax will be imposed at 50 per cent of the prevailing domestic rate on shares, subject to the Limitation of Benefits (LOB) article.

Withholding tax on interest payment

Withholding tax applicable on interest payments made (on the fixed income business side) to Mauritius entities stand at a beneficial rate of 7.5 per cent, much lower than the existing 15 per cent level for Singapore and Cyprus.