Adapting Tax Laws to Prevent Revenue Loss

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The Indian government observed a loss in tax revenue due to certain tax exemptions under the DTWA that protected investors. To address this, the government made changes stating that Mauritian entities would no longer receive tax exemptions if acquiring shares in India post-April 1, 2017. Subsequently, an amendment required Mauritian entities to pass a principal purpose test to enjoy lower taxes. As a result, Mauritius, once the top source of FDI inflows into India, saw a significant decline in investments.

In today’s episode for 18th April 2024, we tell you why a tax treaty amendment with Mauritius nudged foreign investors to withdraw their investments from the Indian stock market and why Mauritius let that happen.

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