"Preliminary discussion has taken place this month in Mauritius. Mauritius Prime Minister is scheduled to come India," a top official in the Finance Ministry told PTI.
Earlier in 2006, India and Mauritius had agreed to review the operation of a Joint Working Group to strengthen the mechanism for exchange of information under the tax treaty, besides putting in place adequate safeguards to prevent misuse of the DTAA.
"We in India see treaty misused but they see it as part of treaty. We will again raise our concern," the official said.
Mauritius tops the list of countries bringing foreign direct investment into the country.
India has already posted a tax information officer at the Indian High Commission in Mauritius to enhance cooperation between the two countries.
The revised Double Taxation Avoidance Convention (DTAC) is expected to pave way for sharing of banking and tax-related information between the two countries and prevent money laundering and evasion of taxes.
The revised treaty, according to sources, will be addressing the controversial clauses relating to capital gains tax on sale of securities.
While short-term capital gains are taxed at 10 per cent in India, they are exempted in Mauritius. Several companies take advantage of the DTAA and escape paying taxes in both the countries.
Around 42 per cent of FDI and about 40 per cent of FII fund flows into India are routed through the island nation.
It is believed that a large majority of them are third country investors which use the DTAC with Mauritius for saving capital gains tax.
Source: http://www.mydigitalfc.com/news/india-mauritius-begin-talks-revised-tax-treaty-902
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