Under the present treaty, only Mauritius has the right to tax capital gains on investment which is routed through it in India. But it does not levy any tax as per its domestic policies giving advantage to the investors
New Delhi: Amidst panic in the stock market over double tax avoidance treaty with Mauritius, the Indian government on Monday said India “cannot impose arbitrarily” capital gains tax on investment routed through the island nation, reports PTI.
“How can you do that? There has to be some agreement on that. Right now, it is not there in the agreement. You cannot impose it arbitrarily,” Indian finance secretary Sunil Mitra told PTI.
However, he said the two nations are likely to hold discussions on revision of the double tax avoidance treaty, which has been used for routing third country investment into India for availing of tax exemptions.
The BSE benchmark Sensex plunged by over 556 points in intra-day trade Monday on widespread panic selling by funds as well as retail investors, triggered by reports that the government may impose capital gains tax on investments through Mauritius.
There was a recovery in the market in the afternoon, but the Sensex was trading 336 points lower 1450 hours.
Asked to comment on the market fall, Mr Mitra said, “That is up to the market. What can I say?”
The finance secretary said the process of renegotiation of the tax treaty with the island nation began in 2006 through a joint working group, but got stalled in 2008.
New Delhi has suggested dates in July and August for resumption of talks. “They have to give their consent,” he said.
Under the present treaty, only Mauritius has the right to tax capital gains on investment which is routed through it in India. But it does not levy any tax as per its domestic policies giving advantage to the investors.
Most of the foreign direct investment as also the inflows in the stock market are round-tripped through Mauritius.
Royal Sundaram Alliance Insurance expansion strategy is based on the hub-and-spoke model, where in a branch would serve the smaller adjoining locations
Royal Sundaram Alliance Insurance said it plans to increase its presence in the semi-urban and rural areas of the country. As part of this initiative, the company recently inaugurated its new branch in textile hub of Karur, a company statement said.
The company’s expansion strategy is based on the hub-and-spoke model, where in a branch would serve the smaller adjoining locations, it added. The new branch at Karur would serve the adjoining areas like Kulithalai, Pallipatti and Aravakurichi, it said.
“This move is a part of our geographic expansion strategy in tier II and tier III cities. Karur has high potential and generated substantial business in the current year and we expect a higher growth,” Royal Sundaram Alliance Insurance managing director Ajay Bimbhet said.
The issue of making the ‘know your customer’ (KYC) norms more strict was taken up at the last meeting of a sub-committee of the Financial Stability Development Council
With the government facing heat on the issue of black money, the Finance Ministry has begun an exercise to make identification norms uniform and more stringent for capital market players like FIIs (foreign institutional investors), mutual funds and brokerage customers.
In addition, market regulator SEBI is working on further tightening of its surveillance mechanism, an official in the Finance Ministry said.
The issue of making the ‘know your customer’ (KYC) norms more strict was taken up at the last meeting of a sub-committee of the Financial Stability Development Council (FSDC), headed by Reserve Bank of India governor D Subbarao.
“We are working on a common KYC. It will be more strong and stringent,” the official said. At present, different market players follow different KYC norms.
As for the SEBI surveillance rules, he said, “We have enough safeguards to check inflow of illicit and unaccounted money into the capital market. The only possibility of such flows into the market is through FII and high net worth individuals. We will make the surveillance stricter.”
The moves are part of the government’s fight against the black money menace amid intense pressure from civil society, Opposition parties and the Supreme Court.
The RBI and SEBI have been tightening KYC norms from time-to-time. Furthermore, banks also required to update the information of their clients.
Between January, 2010, and January, 2011, SEBI banned over 30 entities for engaging in circular trading for periods ranging from two months to two years.