New FPI Rules: Mauritius route tax exemption has not ended yet, tax department clarified

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Mauritius-based FPIs: India and Mauritius have agreed on some changes regarding tax exemptions. A big fall was seen in the market after the news related to that…

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The Government of India has issued a clarification regarding changes in the tax exemption available to Foreign Portfolio Investors (FPIs) coming through the Mauritius route. In the clarification issued by the Income Tax Department on Friday, it was said that the changes have not been implemented yet. This means that FPIs taking Mauritius route will continue to get the same tax exemption benefits as before.

Changes have not been notified yet
The Income Tax Department on Friday issued a clarification regarding the recent changes in the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius. He said that the changes have neither been ratified nor notified yet.

The changes will come into effect even after being notified under Section 90 of the Income Tax Act 1961. Until the protocols come into effect, concerns or objections about them are premature.

Market sentiment spoiled by news
This clarification from the Income Tax Department has come when the market sentiment started deteriorating after the news of change in tax exemption available to Mauritius based FPIs. Selling was seen in the domestic stock market on Friday after the news of abolition of tax exemption. Riding on the spectacular rally, the domestic market suffered a loss of more than 1 percent on Friday.

The stock market fell so much
On the last day of the trading week ending April 12, BSE Sensex closed at 74,244.90 points with a loss of 793.25 points (1.06 percent). A day before that, the market had crossed the level of 75 thousand points for the first time and achieved a new all-time high level of 75,124.28 points. On Friday, NSE’s Nifty 50 index fell 234.40 points (1.03 percent) to 22,519.40.

Agreement reached in early March
In fact, the governments of India and Mauritius have signed an agreement to improve the Double Taxation Avoidance Agreement. An agreement in this regard was signed between the two countries on March 7, but news about it came out on Wednesday. After that there was Eid holiday in the market on Thursday. When the market opened on Friday after the holidays, the impact of the news was visible.

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