NEW DELHI (AP) — India says it is closing a tax loophole that allowed its citizens to channel income through the tropical island of Mauritius and avoid paying taxes.
Officials say India next year will begin imposing a capital gains tax on investments routed through Mauritius, in line with global efforts to curb financial malpractices.
For decades, wealthy Indians have exploited a loophole in the countries' 1993 tax treaty designed to prevent double taxation. Instead, many stash their earnings tax-free in Mauritius and then bring them back to India. The practice, known as "round-tripping," has made Mauritius India's largest official source of foreign direct investment.
Finance ministry official Shaktikanta Das said Wednesday the changes would curb tax evasion and streamline investment flows in line with India's pledge to crack down on corruption.