Government Amends Tax Treaty With Singapore To Curb Black Money

In its efforts to plug the loopholes in the international tax treaties, the government on Friday signed the third protocol for amending Double Taxation Avoidance Agreement (DTAA) with Singapore.

Before this, the government had amended the DTAA treaty with Mauritius and Cyprus. Due to loopholes in the DTAA, a large number of foreign portfolio investors (FPI) and foreign entities managed to route their investments in India without paying taxes.

Before amendments, the DTAA with Singapore, Mauritius and Cyprus gave full exemption on capital gains to investors allowing round tripping of foreign funds into Indian economy.

In a press conference with the media, Finance Minister Arun Jaitley said that the amended DTAA pact with Singapore was similar to the pact with Mauritius.

Capital gains tax will be imposed on investments from Singapore that are made from April 2017 onwards. The tax rate will be half of the existing Indian rate for the next two years and will then be equated with the prevalent rate in India  by April 2019.

While Mauritius has traditionally accounted for almost a third of the total Foreign Direct Investment inflows into India, of late, Singapore has emerged as a preferred destination for investors to route their money to India.

Apart from this, India has also signed an agreement with Switzerland under which the European nation will provide real time information about all the money parked in Swiss banks by Indian citizens.

The Modi government came to power with a promise to curb the generation and hoarding of black money. Over the past one year, the government has taken various steps including demonetisation of high denomination currency notes and amending tax treaties with other nations to control the black economy of the country.