Finance Minister Nirmala Sitharaman announced on Wednesday that India has renegotiated its tax treaties with Mauritius, Singapore and Cyprus to restore the country's right to tax capital gains arising from investments in India at the source. According to reports from The Times of India, these changes are part of wider efforts to strengthen India's tax base and prevent the misuse of treaty provisions. Speaking at the Eighth International Tax Conference on 'New Age Taxation', organised by the International Tax Research and Analysis Foundation, Sitharaman emphasized that tax treaties play an important role in determining how income and gains involving residents and entities across different countries are taxed. The finance minister also called for independent research on tax policy to become part of public discourse, saying tax professionals must look beyond sectoral interests and put the national interest first. As reported by The Hindu, Sitharaman noted that India faced its own set of challenges on the path to growth and development, but was better placed despite the difficult global environment.
Under the earlier arrangements, investors based in some jurisdictions, particularly Mauritius, could claim that capital gains from the sale of shares in Indian companies were taxable only in their country of residence. As reported by The Times of India, this effectively limited India's ability to tax such gains, creating a significant revenue gap for the country. Sitharaman highlighted that these changes are aimed at making compliance requirements more proportionate while easing some of the burdens associated with India's tax framework. The finance minister emphasized that "a mature tax policy debate must go beyond sectoral considerations" and urged tax professionals to "rise above sectoral consideration and put nation first."
The India-Mauritius tax treaty was amended through a protocol signed in 2016, shifting the taxation of capital gains on shares acquired on or after April 1, 2017, towards the source country, India. According to the report, investments made before that date were grandfathered under the earlier provisions. Similar changes were made in India's tax treaties with Singapore and Cyprus. The Finance Minister noted that the government has deliberately rationalised provisions relating to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS), including raising thresholds and reducing unnecessary criminal consequences. These changes aim to make compliance requirements more proportionate while easing some of the burdens associated with India's tax framework.
Sitharaman called for reducing tax litigation rather than merely managing dispute backlogs, while urging industry representatives and policy researchers to elevate public discourse by proposing workable, quantified statutory alternatives. As reported by The Times of India, the Finance Minister emphasized the philosophy of "make voluntary compliance easier and reserve enforcement capacity for cases that genuinely require it." She highlighted that Vivad se Vishwas schemes provided taxpayers and the government an opportunity to close old disputes rather than litigate them indefinitely. In 2024, the monetary threshold for departmental appeals was raised to ₹60 lakh before the appellate tribunal, ₹2 crore before the high courts, and ₹5 crore before the Supreme Court. Sitharaman stressed that "the continuing negative commentary saying nothing is happening in this country itself is something I worry about," calling for better understanding of global challenges and India's position.
